1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
MrMuchimi
3 years ago
8

Professional auditing standards identify the principal "management assertions" that underlie a set of financial statements. The

occurrence assertion was particularly critical for ZZZZ Best's insurance restoration contracts. ZZZZ Best's auditors obtained third-party confirmations to support the contracts, reviewed available documentation, performed analytical procedures to evaluate the reasonableness of the revenues recorded on the contracts, and visited selected restoration sites. Comment on the limitations of the evidence that these procedures provide with regard to the management assertion of occurrence.
Business
1 answer:
faust18 [17]3 years ago
4 0

Answer:

Before we treat the question, lets examine the key words:

> Management assertions: this refers to claims made by members of management of a company with respect to certain aspects of a business. The concept is primarily used in regard to the audit of a company's financial statements, where the <em>auditors rely upon a variety of assertions</em> regarding the business. The auditors are required to test the validity of these assertions by conducting a number of audit tests.

> Occurrence Assertion: This belongs to one of the categories of claims usually made by management. Occurrence Assertion arises in two instances:

i. <em>Business transactions</em>, mostly in regard to the <em>income statement</em>. Here occurrence claims refer to the assertion that the business transactions recorded in the income statement actually took place.

ii. Occurrence assertion also arises when the authenticity of the information related to the presentation of information within the financial statements is being considered.

Section 31 of the Statements on Auditing Standards requires that these assertions be investigated, supported or verified using procedures and or other reasonable methods outside of the system providing these assertions.

The question indicates that at least three steps in this direction was taken:

  • ZZZZ Best's auditors obtained third-party confirmations;
  • they reviewed available documentation and performed analytical procedures to evaluate the legitimacy or the integrity of the revenues recorded on the contract
  • they visited selected restoration sites (most likely for direct observation)

     

The questions suggests that the evidence availed by these procedures are not without limitations. In order words, irrespective of the rigor involved with same, it is not fail proof.

Here are reasons why.

Explanation:

1. Absolute Proof may not be possible.

Fallacious and fraudulent assertions may be designed such that other evidencing documentation support the fraudulent position asserted

2. Third-Party confirmations are not fail proof. With sufficient motivation, they may be designed or influenced to support a fraudulent assertion. In a similar case-study, the restoration sites visited was fraudulently selected and stage-managed to give the appearance of an ongoing restoration work.

3. Some assertions are not material:  Materiality is a concept or convention within auditing and accounting relating to the importance/significance of an amount, transaction, or discrepancy. If the assertion is of no significance then the judgement arrived at by the audit process will carry same weight.

4. Limitations of Time and Cost of verifying assertions:

This must be considered as accounts must be prepared within a certain time scale and the auditor may have to do with less than perfection and ideal evidence may be too expensive to obtain. In the example referred to above, It was later discovered that the restoration site was bogus. The informant had contacted the audit firm in April 1987 and asked for $25,000

in exchange for information proving that one of the firm’s clients was engaging in a massive fraud.

In summary, when presented with assertions, it is not sufficient to obtain third party confirmations. Third party confimations ought to be investigated.

Cheers!

You might be interested in
A benchmark market value index is comprised of three stocks. Yesterday the three stocks were priced at $16, $24, and $55. The nu
tatyana61 [14]

Answer:

The 1-day rate of return on the index = 5.36%

Explanation:

Index Value = Sum of (Outstanding Shares*Share Price)

      q          p           mv              q1            p1          mv1

640,000   16    10240000      640000    20     12800000

540,000   24   12960000      540000    22     11880000

240,000   55   <u>13200000</u>  240000    57     <u>13680000</u>

                        <u>36400000 </u>                                <u>38360000</u>

Note: q/q1 = no of shares, p = price per share, mv/mv1 = market value, p1 = changed price per share

Return = (Index Value Today - Index Value Yesterday)/Index Value Yesterday

Return = (38360000 - 36400000) / 36400000

Return = 0.05385

Return = 5.36%

3 0
3 years ago
BeFriends Corporation uses the trademark of Community Life Inc., a social media site, as a meta tag without Community Life’s per
timama [110]

BeFriends Corporation uses the trademark of Community Life Inc.  a social media site, as a meta tag without Community Life’s permission. This may be permissible​ (a) if the appropriating site has nothing to do with the meta tag.

<u>Explanation:</u>

The using of the Meta Tag is Permissible because the trade mark name is being used for a different product or service and it does not involve any kind of  trade mark infringement.

4 0
4 years ago
Read 2 more answers
Van Den Borsh Corp. has annual sales of $68,735,000, an average inventory level of $15,012,000, and average accounts receivable
Romashka-Z-Leto [24]

Answer:

The answer is d. -32 days.

Explanation:

<u>*The before change cash conversion cycle</u> = Days of inventory outstanding + Days of receivables outstanding - Days of payable outstanding.

in which:

Days of inventory outstanding = Average inventory / Cost of good sold x 365 = ( 15,012,000 / ( 68,735,000 x 0.85) ) x 365 = 94 days

Days of receivables outstanding = Average Receivables / Revenue x 365 = ( 10,008,000 / 68,735,000 x 365 = 53 days

Days of payable = 30 days

=> Before change cash conversion cycle = 117 days.

* <u>The after-change cash conversion cycle</u> is calculated with the same formula, however with estimated changes be applied in the formula as followed:

Days of inventory outstanding = Average inventory / Cost of good sold x 365 = ( (15,012,000 - 1,946,000) / ( 68,735,000 x 0.85) ) x 365 = 82 days

Days of receivables outstanding = Average Receivables / Revenue x 365 = ( (10,008,000 - 1,946,000) / 68,735,000 x 365 = 43 days

Days of payable = 40 days

=> After-change cash conversion cycle = 82 + 43 - 40 = 85 days

<u>=> Net change is 85 - 117 = -32 days</u>

6 0
3 years ago
Luis, marlon, and victoria are counting money. they each have the same amount in dollar bills, quarters, dimes, nickels, and pen
Hoochie [10]
The characteristics is its divisibility: money can be divided into smaller parts and the sum of those parts has the same value as the original money. Here we see that different people have the same amount of money in different forms.

Other characteristics of money are its durability, transportability and the resistance to being faked. 
4 0
3 years ago
Read 2 more answers
Most economists prefer _____ as the best indicator of current economic performance.
balu736 [363]
Most economists prefer real GDP growth as the best indicator of current economic performance. Real GDP is the gross domestic product in constant dollars. In other words, it is a nation's total output of goods and services, adjusted for price changes. The real GDP allows economists to make useful comparisons of a nation's output and services by eliminating the effect of price changes. It is also known as inflation-corrected GDP and constant-price GDP.
6 0
3 years ago
Read 2 more answers
Other questions:
  • Which of the following is usually used to connect a monitor to a computer?
    6·1 answer
  • A rectangular crate has the dimensions of 32.1 inches by 28.2 inches by 1 foot.
    14·1 answer
  • The return on common stockholders’ equity is computed by dividing a) net income less preferred dividends by ending common stockh
    9·1 answer
  • Axle Co.'s accounts receivable turnover was 9.9 for this year and 11.0 for last year. Betterman's turnover was 9.3 for this year
    5·2 answers
  • How is studying microeconomics significant​
    14·1 answer
  • A security with a level of systematic risk that is the same as that of the market has a beta that is
    8·1 answer
  • Your company is trying to decide which one of two projects it should accept. Both projects have the same start-up costs. Project
    9·1 answer
  • Need help ASAP please answer this
    9·1 answer
  • Nellie recently sold her old laptop directly to a student from different country using an e-commerce website. the website she us
    6·1 answer
  • If a car company collaborated with a sheet metal supplier, the car company would be the supplier's ______.
    13·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!