Please Answer The Following 7 Discussion Questions At Least

Please Answer The Following 7discussion Questions Inatleast100 Wordsp

Please answer the following 7 discussion questions in at least 100 words each.

1. List five asset accounts, three liability accounts, and five expense accounts included in the acquisition and payment cycle for a typical manufacturing company.

Asset accounts in a manufacturing company's acquisition and payment cycle typically include Inventory, Raw Materials Inventory, Work-in-Progress Inventory, Finished Goods Inventory, and Machinery and Equipment. Liability accounts often include Accounts Payable, Notes Payable, and Accrued Expenses. Expense accounts involved in this cycle cover Cost of Goods Sold, Manufacturing Expenses, Raw Materials Expense, Machinery Depreciation Expense, and Maintenance and Repairs Expense. These accounts collectively enable the company to track its resource investments, obligations, and costs related to acquiring and utilizing assets essential for manufacturing operations, ensuring financial accuracy and operational efficiency.

2. Explain the relationship between substantive tests of transactions for the acquisition and payment cycle and tests of details of balances for the verification of property, plant, and equipment. Which aspects of property, plant, and equipment are directly affected by the tests of controls and substantive tests of transactions and which are not?

Substantive tests of transactions verify that acquisition, payment, and depreciation transactions are properly authorized, recorded, and comply with applicable standards, directly affecting the recorded balances of property, plant, and equipment (PP&E). These tests ensure that asset additions, disposals, and depreciation charges are accurate. Tests of controls assess the effectiveness of internal controls over transactions related to PP&E, influencing the reliance auditors place on substantive procedures. Some aspects, like physical existence and condition of PP&E, are less affected by transaction tests, being primarily verified through physical inspection and other audit procedures rather than transaction testing.

3. Why are liability accounts included in the capital acquisition and repayment cycle audited differently from accounts payable?

Liability accounts, such as long-term debt or accrued liabilities, are audited differently from accounts payable because they often involve more complex agreements, interest calculations, or contractual terms. Accounts payable typically involve straightforward, short-term obligations supported by invoices, making them easier to verify through classic substantive procedures. In contrast, liability accounts may require verification of contractual terms, amortization schedules, or estimated amounts, necessitating specialized audit procedures. Different risk profiles and control considerations also warrant separate audit approaches, ensuring a comprehensive and accurate assessment of each liability category.

4. What are the primary objectives in the audit of owners’ equity accounts?

The primary objectives in auditing owners’ equity accounts include verifying the accuracy of contributed capital, retained earnings, and other comprehensive income balances, ensuring proper recording of dividends, and confirming that changes during the period are properly authorized and recorded. Auditors assess the fairness and consistency of reported equity balances with underlying documentation, such as stock certificates, dividend declarations, and earnings statements. They also verify that the opening balances are accurate, and that additions or deductions are supported by appropriate documentation, thereby ensuring the overall integrity of the financial statements.

5. What kinds of information can be confirmed with a transfer agent?

A transfer agent provides confirmation of stockholder details, including the number of shares owned, share transfer history, and outstanding stock certificates. They can also confirm dividends paid, stock option exercises, and restrictions or liens on stock holdings. This information is vital for verifying shareholder equity, preventing fraud, and ensuring that ownership records accurately reflect the company's shareholders. Additionally, transfer agents can confirm the issuance or cancellation of shares, helping auditors verify the accuracy of owners' equity and related disclosures in the financial statements.

6. Which documents will be used to verify accrued property taxes and the related expense accounts?

Verification of accrued property taxes involves reviewing tax assessments, official notices from taxing authorities, and remittance records. Supporting documents include tax bills, payment receipts, and journal entries recording the accrual in the financial statements. Confirmation letters from tax authorities may also be used. These documents verify the existence, amount, and accuracy of property tax liabilities and relate to expense accounts such as Property Tax Expense, ensuring proper recognition in accordance with applicable accounting standards.

7. It is less common to confirm accounts payable at an interim date than accounts receivable. Explain why.

Confirming accounts payable at an interim date is less common because these liabilities are typically short-term, frequent, and subject to close-out or settlement before the fiscal year-end. Accounts receivable tend to have longer collection cycles and are more suited to confirmation at interim periods to assess receivables' existence and valuation throughout the year. Also, accounts payable are often paid or adjusted before year-end, making interim confirmation less effective or necessary. The risk of material misstatement is generally higher for receivables, prompting more frequent confirmation compared to payables.

Paper For Above instruction

This paper addresses the seven discussion questions related to the audit processes, focusing on acquisition and payment cycles, property, plant and equipment, owners’ equity, and related confirmations. Each question is answered with detailed explanations based on accounting principles and audit procedures, providing comprehensive insights suitable for an academic or professional audience.

References

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