CASE 9.1 Wally’s Billboard & Sign Supply

After completing the audit program, answer the following questions:

[1] Why is the audit of cash an important part of the audit?

[2] Bill performed tests of controls for all transaction cycles with good results. Why is it important to also perform substantive audit procedures for the ending cash balance even when tests of controls over transactions that affect the cash account indicate that those controls are operating effectively?

[3] According to AICPA auditing standards, what are the necessary ingredients for audit evidence to be considered “appropriate”?

[4] For each procedure listed in the audit program (schedule C 2), indicate the primary assertion(s) targeted by the procedure.

[5] For each error, concern, or adjustment you listed on the Audit Summary (schedule C 3), briefly describe at least one additional test you could perform to gain evidence as to whether or not the cash account is materially misstated.

[6] The AICPA and the American Banker’s Association developed a standardized bank confirmation form—see working paper C 6. What is the purpose for confirming information in item number two on the bank confirmation form? Identify the accounts and related audit assertion(s) to which the information in item number two is relevant.

[7] What audit procedures might you perform if you were to decide that the risk of fraud involving the cash account was relatively high for this client?

[8] Perform an online search for “electronic bank confirmations.” Summarize in one page or less what you learn about recent developments in the use of web-based bank confirmations. Include a brief discussion of the advantages of electronic confirmations in your write-up.

 

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