Overview: For Milestone Two, you must review the data collected in the case study and report on whether it is sufficient to confirm or deny the assertions of management. Analyze audit evidence gathered to ensure it is sufficient and appropriate and provide alternative procedures that could be performed to satisfy the assertions. The information in this milestone will be incorporated into your audit report along with the information you compiled for Milestone One.
To do so, analyze the following sections of Lakeside Company: Case Studies in Auditing:
- Case 4: Assessing Control Risk
- Case 5: Tests of Controls: The Revenue and Cash Receipts Cycle
- Case 6: Procedures and Audit Documentation: Testing the Inventory Purchasing System
- Case 7: Designing Substantive Audit Tests: Compensation Plans
- Case 8: Observation of Physical Inventory Count
Prompt: Review the information and data in the assigned sections of the Lakeside Company to ensure the audit evidence gathered is sufficient and appropriate, and provide alternative procedures that could be performed to satisfy the assertions.
Note: Milestone Two is a draft of some of the critical elements of Part I of the final project. Specifically, the following critical elements must be addressed:
A. Determine the risks associated with having the confirmation process controlled by the client.
B. Determine the primary assertions associated with classes of transactions and events, account balances, and presentation and disclosure from the scenario.
C. Analyze the types of evidence gathered and received from the scenario and document the sufficiency. Be sure to include examples from the scenario to support your response.
D. Analyze the types of evidence gathered and received from the scenario and document the appropriateness. Be sure to include examples from the scenario to support your response.
E. Recommend appropriate alternate procedures that would satisfy your assertions with the same sufficiency and appropriateness. For example, if your confirmations are not received, what alternate procedures could you use to reach the same sufficiency and appropriateness?