The Auditor Determines That Each of the Following Objectives Will

question 11

Essay

The auditor determines that each of the following objectives will be part of your audit of Cameron 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.
Subtantive Procedures:
- Select a sample of items during the physical inventory count and determine that they have been included on count sheets.
- Select a sample of recorded items and examine supporting vendors' invoices and contracts.
- Review drafts of the financial statements.
- Select a sample of recorded items and examine supporting vendors' invoices and contracts.
- Select a sample of recorded items on count sheets during the physical inventory count and determine that items are on hand.
$\begin{array}{|l|l|l|}\hline & \text { Audit Objective }& \text { Substantive Procedures }\\\hline 1 & \text { Establish the completeness of } \\\hline 2 & \text { Establish the accuracy of cost } \\& \text { amounts of inventories. } \\\hline & \text { Determine that the presentation } \\& \text { and disclosure of inventories } \\& \text { and cost of goods sold is } \\3 & \text { adeguate. } \\\hline & \text { Establish that the client has } \\4 & \text { rights to the recorded } \\& \text { inventories. } \\\hline & \text { Establish the existence of } \\ 5 &\text { ending inventory. }\\\hline\end{array}$

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Definitions:

Predetermined Overhead Rate

A predetermined rate employed to allocate estimated manufacturing overhead costs to products, calculated before the period starts, using projected costs and activity levels.

Direct Labour Hour

A measure of labor that directly contributes to the production of goods, used in calculating labor costs and efficiency.

Manufacturing Overhead

All manufacturing costs that are not directly associated with the production of a product, including costs related to indirect materials, indirect labor, and other indirect expenses.

Overapplied Overhead

This occurs when the overhead allocated to products or job orders during a period exceeds the actual overhead costs incurred.