For each of the following audit procedures, identify which audit objective(s) is/are being addressed:
a. Inquiry of the client’s legal counsel as to whether there is any outstanding litigation against the client that they are aware of.
b. Taking a sample of items from the client’s inventory records and physically counting the items in the warehouse.
c. Sending confirmations to a sample of customers requesting that they confirm the balance owing to your client.
d. Taking a sample of accounts receivable and reviewing case receipts subsequent to the year-end to see if that receivable has been collected.
a. The audit objective being addressed in conducting an inquiry of the client’s legal counsel is the assertion of completeness. By inquiring about any outstanding litigation against the client, the auditor is trying to ensure that all potential legal claims and liabilities have been disclosed.
b. The audit objective being addressed in taking a sample of items from the client’s inventory records and physically counting them in the warehouse is the assertion of existence. By physically verifying the inventory, the auditor is determining if the inventory recorded in the books actually exists.
c. The audit objective being addressed in sending confirmations to a sample of customers requesting that they confirm the balance owing to the client is the assertion of existence. By obtaining direct external confirmations from customers, the auditor is verifying the existence of the accounts receivable balances and ensuring they are valid.
d. The audit objectives being addressed in taking a sample of accounts receivable and reviewing cash receipts subsequent to the year-end are the assertions of completeness and cutoff. By reviewing cash receipts subsequent to the year-end, the auditor is checking if the receivables that were outstanding at year-end have been subsequently collected, ensuring the completeness of the receivables balance. Additionally, the auditor is checking the cutoff, to ensure that the cash receipts are recorded in the correct period.