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Essay Question #1 Suppose that the accounting manager of a firm you are auditing is suspected...

Essay Question #1

Suppose that the accounting manager of a firm you are auditing is suspected of manipulating sales and collection transactions to make earnings and receivable payments look higher than they are. What kinds of evidence will your audit look for? Suppose that this accounting manager wanted sales to appear lower in order to reduce tax expenses. What kinds of evidence will your audit look for in this case?

Essay Question #2

When deciding how large a sample size to use in auditing collections, what factors should you consider? What might lead you to increase or decrease the sample size?

Essay Question #3

You have just gotten a new audit client that had been audited by another firm for many years. In assessing how effective or ineffective the current internal controls are, what factors will you examine?

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Answer #1

essay question 1

increasing or decreasing the sales can be cross checked with the stock calculations. sales quanitity must be equal to the opening plus puchase minus closing stock minus scrap. then it should be equal to sales. As for accounts receivable is concern it should be crosschecked with the debtors account. confirmation letter should be obtained from them. Letters from outsiders is considered the fair evidence of audit. Reconcilation with the party is to be checked if there is any difference with the balance of the party.

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