Evidence and Assertions Continued Below are audit procedures – five that are associated with the sales cycle and five that are associated with the purchases cycle. For each procedure, identify: The management assertion that is being tested The type of evidence gathered. Procedure Evidence Assertion Tour the client’s production facilities to verify the presence of manufacturing equipment listed as PP&E. Compare the ratio of repair and maintenance expense to total plant assets for the current year to the prior two years and investigate unusual differences to determine if the client has inappropriately capitalized expenses instead of expensing them. Watch a clerk in the payables department to ensure that, prior to generating a payment, the clerk matches the invoice to the shipping record to ensure the shipment has been received. Review the board of directors’ meeting minutes to identify all related parties to ensure that no related-party sales have been recorded as regular sales. Select a sample of payments made after year-end and review supporting documentation to ensure all liabilities have been properly recorded and/or accrued as of year-end.

If the objective of a substantive test is to detect overstatements of sales, the auditor’s direction of testing should be from the

Which of the following will most likely give the most assurance concerning the valuation assertion about accounts receivable?

An auditor issued an audit report that was dual dated for a subsequent event occurring after the original date of the auditor’s report but before issuance of the related financial statements. The auditor’s responsibility for events occurring subsequent to the original report date was:

Which of the following procedures is least likely to be performed before the balance sheet date?

Auditors are often concerned with the possibility of overstatement of sales and receivables. However, management may also have reasons for understating these balances. Which of the following would explain understatement of sales and receivables?

Subsequent Events Milne Manufacturing’s fiscal year end was 12/31/X5. The auditors finished all test work on 3/15/X6, and the audit report and financial statements were publicly distributed on 3/28/X6. Consider each of the following material events and determine what action, if any, the auditor should take. Select the best action for each of the situations below. Each answer will be used only once.

All of the following are considered when developing a pharmacy’s formulary, except 

The CPA firm of Mantle and Maris issued an audit report for the financial statements of the Berra Company. Thereafter, each of the following four events took place. Which of these events is most likely to cause Mantle and Maris to make additional inquiries?

Which of the following events occurring after the issuance of an auditor’s report most likely would cause the auditor to make further inquiries about the previously issued financial statements?