Homework 1


Read the following standards as presented at the PCAOB
Auditor Reporting
3100 Reporting on Audits of Financial Statements
AS 3101: Reports on Audited Financial Statements
AS 3110: Dating of the Independent Auditor’s Report
AS 3320: Association with Financial Statements
Forming an Opinion and Reporting on Financial Statements

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Forming an Opinion and Reporting on Financial Statements: Auditing Interpretations of Section 700

Modifications to the Opinion in the Independent Auditor’s Report

Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report

Special Considerations—Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks

Special Considerations—Audits of Single Financial Statements and Specific Elements, Accounts, or Items of a Financial Statement

The auditor determines that each of the following objectives will be part of your audit of Bozington, Co., Inc. For each audit objective, select a substantive procedure that would help to achieve that objective. Each of the procedures may be used once, more than once, or not at all.

Audit Objective

1. Establish the completeness of inventories.
2. Establish the accuracy of cost amounts of inventories.
3. Determine that the presentation and disclosure of inventories and cost of goods sold is adequate.
4. Establish that the client has rights to the recorded inventories.
5. Establish the existence of ending inventory.

Substantive procedures

a. Examine current vendors’ price lists.
b. Review drafts of the financial statements.
c. Select a sample of items during the physical inventory count and determine that they have been included on count sheets.
d. Select a sample of recorded items and examine supporting vendors’ invoices and contracts.
e. Select a sample of recorded items on count sheets during the physical inventory count and determine that items are on hand.
f. Test the reasonableness of general and administrative labor rates. 


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