15 Question 1 Audit Procedures Marks Part one-Audit procedures The Tatua Co-operative Dairy Company Ltd (Tatua) is an independent dairy company in the Matamata-Piako District of the Waikato region. You have been assigned as an audit manager of Tatua for the year ended 31 March 2020. You have identified the following misstatements in Tatua Ltd's sales, cash collection, and account receivables. A cash receipt of $ 15,000 was posted to an incorrect customer account. 2. An account receivable of $ 22,000 is recorded in the account receivable master file but not included in the aged trial balance. 3. An account receivable of $ 34,000 is recorded in the master file but in the aged trial balance it is recorded as $ 43,000 4. A shipment made on 2 April 2020 is recorded as a sale in the current period. 3. $10,000 worth of goods were returned for credit on the last day of the financial year but the sales return was not recorded until 5 April 2020. Required For each of the 5 misstatements, a) Identify what balance-related audit objective/s is/are affected (2.5 marks) b) Suggest an internal control to prevent this misstatement (2.5 marks) c) To detect misstatements, what audit procedure(s) would the auditor performs? (5 marks) Provide your answer in the below table. b. Internal control c. Audit procedure Transaction a. Audit Objectivels 1. A cash receipt of $ 15,000 was posted to an incorrect customer account. 2. An account receivable of $ 22,000 is recorded in the account receivable master file but not included in the aged trial balance. 3. An account receivable of $ 34,000 is recorded in the master file but in the aged trial balance it is recorded as $ 43,000. 4. A shipment made on 2 April 2020 is recorded as a sale in the current period. 5. $10,000 worth of goods were returned for credit on the last day of the financial year but the sales return was not recorded until 5 April 2020. 15 Question 1 Audit Procedures Marks Part one-Audit procedures The Tatua Co-operative Dairy Company Ltd (Tatua) is an independent dairy company in the Matamata-Piako District of the Waikato region. You have been assigned as an audit manager of Tatua for the year ended 31 March 2020. You have identified the following misstatements in Tatua Ltd's sales, cash collection, and account receivables. A cash receipt of $ 15,000 was posted to an incorrect customer account. 2. An account receivable of $ 22,000 is recorded in the account receivable master file but not included in the aged trial balance. 3. An account receivable of $ 34,000 is recorded in the master file but in the aged trial balance it is recorded as $ 43,000 4. A shipment made on 2 April 2020 is recorded as a sale in the current period. 3. $10,000 worth of goods were returned for credit on the last day of the financial year but the sales return was not recorded until 5 April 2020. Required For each of the 5 misstatements, a) Identify what balance-related audit objective/s is/are affected (2.5 marks) b) Suggest an internal control to prevent this misstatement (2.5 marks) c) To detect misstatements, what audit procedure(s) would the auditor performs? (5 marks) Provide your answer in the below table. b. Internal control c. Audit procedure Transaction a. Audit Objectivels 1. A cash receipt of $ 15,000 was posted to an incorrect customer account. 2. An account receivable of $ 22,000 is recorded in the account receivable master file but not included in the aged trial balance. 3. An account receivable of $ 34,000 is recorded in the master file but in the aged trial balance it is recorded as $ 43,000. 4. A shipment made on 2 April 2020 is recorded as a sale in the current period. 5. $10,000 worth of goods were returned for credit on the last day of the financial year but the sales return was not recorded until 5 April 2020. 15 Question 1 Audit Procedures Marks Part one-Audit procedures The Tatua Co-operative Dairy Company Ltd (Tatua) is an independent dairy company in the Matamata-Piako District of the Waikato region. You have been assigned as an audit manager of Tatua for the year ended 31 March 2020. You have identified the following misstatements in Tatua Ltd's sales, cash collection, and account receivables. A cash receipt of $ 15,000 was posted to an incorrect customer account. 2. An account receivable of $ 22,000 is recorded in the account receivable master file but not included in the aged trial balance. 3. An account receivable of $ 34,000 is recorded in the master file but in the aged trial balance it is recorded as $ 43,000 4. A shipment made on 2 April 2020 is recorded as a sale in the current period. 3. $10,000 worth of goods were returned for credit on the last day of the financial year but the sales return was not recorded until 5 April 2020. Required For each of the 5 misstatements, a) Identify what balance-related audit objective/s is/are affected (2.5 marks) b) Suggest an internal control to prevent this misstatement (2.5 marks) c) To detect misstatements, what audit procedure(s) would the auditor performs? (5 marks) Provide your answer in the below table. b. Internal control c. Audit procedure Transaction a. Audit Objectivels 1. A cash receipt of $ 15,000 was posted to an incorrect customer account. 2. An account receivable of $ 22,000 is recorded in the account receivable master file but not included in the aged trial balance. 3. An account receivable of $ 34,000 is recorded in the master file but in the aged trial balance it is recorded as $ 43,000. 4. A shipment made on 2 April 2020 is recorded as a sale in the current period. 5. $10,000 worth of goods were returned for credit on the last day of the financial year but the sales return was not recorded until 5 April 2020. Part two-Audit risk vs Audit procedures The following three risk situations have been identified in the audit of Tatua. situation Acceptable Audit Risk 7% 6% Inherent Risk 30% 30% 50% Control Risk 40% 50% 25% Planned Detection Risk?? 1 2 3 6% ? Required: a) Calculate the planned detection risk for each situation. (3 marks) Provide your answer for question (a) in the below table. Situation Provide workings here your a. Planned detection risk b) In which situation auditors need to do more audit procedures to collect evidence? (2 marks)