Assume that the auditor conducts analytical procedures and f…

Assume that the auditor conducts analytical procedures and finds that the number of days’ sales in accounts receivable increases in one year from 44 days to 65 days. This pattern implies that the auditor should gather evidence to test for the possibility that the client is recording fictitious sales on account. Note: the formula to calculate the number of days’ sales in accounts receivable equals average accounts receivable for the period divided by net sales for the period.

Compare two evidence collection strategies for a LOW risk cl…

Compare two evidence collection strategies for a LOW risk client in the acquisition & payment cycle: (Strategy 1) analytical procedures + inquiry with management versus (Strategy 2) inspection of physical items + confirmation with external organizations True or False? Strategy 1 will be cheaper and will be of higher quality compared to Strategy 2. Strategy 2 will be more expensive but will be of lower quality compared to Strategy 1. 

Consider the following situation: The consensus analysts’ fo…

Consider the following situation: The consensus analysts’ forecast for the company’s stock is equal to $5.06 per share. The earnings per share based on the unadjusted trial balance is $5.07. True or False? It is reasonable to expect conflict between management and the auditor about the validity of booking a 0.02 per share income decreasing adjusting entry to correct a detected misstatement.

Assume two situations in which the auditor is trying to dete…

Assume two situations in which the auditor is trying to determine the appropriate sample size for testing controls.  Situation 1. The expected deviation rate is 0% and the tolerable deviation rate is 2%. Situation 2. The expected deviation rate is 0% and the tolerable deviation rate is 20%.  True or False? Situation 2 will require a larger sample size than Situation 1.