| Course | ACC 491 Contemporary Auditing I (ACC/491) |
|---|---|
| Week | 2 |
| Paper type | Audit evidence and documentation paper |
| Length | about 1,020 words, 4 double-spaced pages plus title page and references |
| Format | APA 7 student paper |
| School | University of Phoenix |
| Program | BS in Accounting |
| Updated | September 2026 |
Free sample paper for ACC 491 Week 2
Matching Evidence to Assertions: Seven Procedures an Audit Team Uses on a Composite Lumberyard's Receivables, Inventory and Sales, and the Working Papers That Prove the Work
[Student Name]
University of Phoenix
ACC/491: Contemporary Auditing I
Week 2 Assignment
[Instructor Name]
[Date]
The lumberyard, its audit team and all figures are composites written for a model paper; standards and research findings come from the sources listed.
A composite lumberyard and home center sells framing lumber, sheet goods, doors, windows and hardware to about 1,100 contractor accounts and to walk-in homeowners from a single large yard. Its December 31 balance sheet shows receivables of $5.6 million, inventory of $7.9 million and annual sales of $61 million. The audit team has identified receivables, inventory and year-end sales as the areas where material misstatement is most likely. Evidence in an audit is not collected for its own sake; each piece is gathered to support a specific claim management is making in its statements. This paper matches the team's procedures to those claims.
Assertions
When management presents financial statements, it implicitly makes assertions about them. For account balances, the assertions include existence, that the receivables and inventory are real, completeness, that nothing is missing, rights and obligations, that the company owns the inventory, and valuation and allocation, that the amounts are appropriate. For transactions such as sales, they include occurrence, completeness, accuracy, cutoff, that sales are recorded in the right period, and classification (American Institute of Certified Public Accountants, 2020). Each procedure the team performs is aimed at one or more of these assertions.
Sufficient and Appropriate Evidence
Evidence must be sufficient, a matter of quantity, and appropriate, a matter of relevance and reliability. Reliability depends on the source and form: confirmations and statements that come from independent third parties usually outweigh records the company generates for itself, evidence the auditor obtains directly is more reliable than evidence obtained indirectly, documentary evidence is more reliable than oral statements and original documents are more reliable than copies.
Confirmation
The team sends confirmation requests to a sample of 60 contractor accounts, selected to cover large balances and a random sample of the rest, asking customers to confirm their balances directly to the auditor. Confirmations are strong evidence of existence because they come from independent parties directly to the auditor. They do not prove valuation, because a customer can confirm a debt it cannot pay. Caster et al. (2008) reviewed research and enforcement cases showing that response rates can be low and that some confirmation failures involved responses the auditor did not control, which is why the team sends and receives confirmations itself and follows up nonresponses with alternative procedures such as examining subsequent cash receipts.
Observation
The team observes the company's physical inventory count on December 31, watching count teams, making test counts of selected stacks of lumber and tracing some counts to the final inventory listing and some items on the listing back to the floor. Tracing from floor to listing tests completeness; tracing from listing to floor tests existence. Observation is persuasive for the moment it occurs but says nothing about ownership, so the team separately examines vendor invoices for items purchased near year end.
Inspection
The team inspects documents: the sales invoices, shipping tickets and customer signatures behind a sample of recorded sales, testing occurrence and accuracy. For cutoff, it examines shipping tickets for the last five days of December and the first five of January to confirm that each sale is recorded in the period the goods left the yard.
Recalculation and Reperformance
Recalculation checks mathematical accuracy, such as footing the receivables aging and recomputing the allowance for doubtful accounts from the company's own percentages. Reperformance means independently executing a procedure or control, such as preparing the December bank reconciliation from bank statements and comparing it with management's reconciliation.
Analytical Procedures
The team develops an expectation of gross margin by product line based on last year's margins and changes in lumber prices, which fell about 12% during the year. It expects the framing lumber margin to be 24 to 26%. The recorded margin is 29%, outside the threshold, so the team investigates and finds that a year-end price reduction was not applied to inventory costing, overstating inventory. Analytical procedures work only when the auditor sets an expectation and a threshold before comparing.
Inquiry
The team asks the credit manager about collectibility of large past-due accounts and the yard manager about slow-moving stock. Inquiry alone is not sufficient evidence; the answers are corroborated by reviewing January collections and the inventory aging report.
Why No Procedure Covers Everything
Confirmation of receivables tests existence but not completeness, because customers rarely report debts the company failed to record. For payables, the opposite is true: the risk is that liabilities are understated, so the team searches for unrecorded liabilities by examining January disbursements and unpaid invoices rather than confirming recorded balances. Procedures must be chosen for the assertion at risk.
Evaluating What Was Found
The margin investigation found inventory overstated by about $140,000. The team records the amount on its summary of uncorrected misstatements, along with a $35,000 cutoff error in which a December 31 shipment was recorded as a January sale. Management agreed to correct both. Had it declined, the team would have compared the combined uncorrected amounts with materiality to decide whether the opinion was affected. Evidence gathering is therefore not only collecting documents but judging whether, taken together, they support the financial statements.
Documentation
The team documents each procedure in working papers that show the objective, the work performed, the evidence obtained, conclusions reached, who performed the work and who reviewed it. Documentation must be detailed enough that an experienced auditor with no prior connection to the engagement could understand what was done and why. The working papers belong to the audit firm, and under AICPA standards they must be retained for at least five years after the report release date; under the PCAOB standard for public company audits, seven years (Public Company Accounting Oversight Board, 2004).
Conclusion
The team's seven procedures each target specific assertions: confirmations and observation for existence, inspection for occurrence and cutoff, recalculation and reperformance for accuracy, analytical procedures to flag unexpected results and inquiry for leads that must be corroborated. Well-organized working papers show that the evidence was sufficient and appropriate and allow a reviewer to follow every conclusion.
References
American Institute of Certified Public Accountants. (2020). Audit evidence (Statement on Auditing Standards No. 142).
Caster, P., Elder, R. J., & Janvrin, D. J. (2008). A summary of research and enforcement release evidence on confirmation use and effectiveness. Auditing: A Journal of Practice & Theory, 27(2), 253-279. https://doi.org/10.2308/aud.2008.27.2.253
Public Company Accounting Oversight Board. (2004). Audit documentation (Auditing Standard No. 3).
What the ACC 491 Week 2 instructions ask
ACC 491 Week 2 generally asks students to explain the nature of audit evidence and audit documentation. Common requirements include the concepts of sufficient and appropriate evidence, the factors affecting reliability, the management assertions about transactions, account balances and presentation, the types of audit procedures and how each relates to particular assertions and the content, ownership and retention of working papers. Some prompts ask students to design procedures for a specific account or to evaluate a set of evidence. The analysis works best when tied to one company's accounts and to the risks in those accounts, with auditing standards and research cited in APA form.
How this ACC 491 Week 2 example is built
A lumberyard offers accounts where different assertions carry different risks: receivables from contractors, where existence and valuation matter most, a yard full of inventory that must be counted, and sales near year end, where cutoff is the concern. The paper begins with the assertions, then describes each of seven procedures as the team actually performs it, linking each to the assertion it tests and commenting on its reliability. A short section explains why the same piece of evidence cannot prove every assertion at once, using completeness of payables as the example. The documentation section describes what a reviewer must be able to reconstruct from the files and how long they are kept.
ACC 491 Week 2 grading rubric: where the points go
The grading for this topic usually rewards correct identification of assertions, correct pairing of procedures with assertions and a sound explanation of reliability and documentation. Faculty check that confirmations are linked mainly to existence, that observation of counts addresses existence, that tests of cutoff examine documents on both sides of year end and that analytical procedures are described with an expectation and a threshold. Reliability should reflect source, independence and form. Documentation must be described in terms of what an experienced auditor could understand without prior connection to the engagement, with retention periods stated. Clear writing, sensible sample choices and cited standards earn the rest of the marks.
ACC 491 Week 2 help: mistakes to avoid
The most common ACC 491 Week 2 slip is claiming that a procedure proves an assertion it does not address, such as using confirmations to prove that receivables are collectible. Confirmations mainly support existence; valuation needs other evidence, such as subsequent cash receipts. Match each procedure to its assertion explicitly. Another weakness is treating inquiry as sufficient on its own; it must be corroborated. Students also describe analytical procedures without an expectation. State what you expected and why. For documentation, remember that the files belong to the auditor and must show who did the work and who reviewed it. Finally, explain why evidence from outside sources is generally more reliable, and give an example from your account.
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ACC 491 Week 2 questions, answered
What does ACC/491 Week 2 usually cover?
It usually covers audit evidence, including sufficiency and appropriateness, management assertions and types of audit procedures, and audit documentation and its retention.
Where can I find a free ACC 491 Week 2 sample paper?
The lumberyard audit example on this page, pairing seven procedures with assertions and describing the working papers, is free to read with margin notes. Share your own account or case, and your first custom paper is on us.
What are the main management assertions?
For account balances they include existence, completeness, rights and obligations, accuracy, valuation and allocation and classification; for transactions they include occurrence, completeness, accuracy, cutoff and classification.
Which audit evidence is most reliable?
Evidence from independent outside sources, evidence the auditor obtains directly and evidence in documentary form are generally more reliable than internally generated evidence or oral inquiry.
How long must audit documentation be kept?
Under AICPA standards, at least five years from the report release date; for public company audits under PCAOB standards, seven years.
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