1.Problem 6.63: The Laundry Money Skim The case below tells the actual story of a cash embezzlement scheme. The case has two major parts: (1) problem and (2) audit approach. For the case, please consider how the auditor may have discovered the cash embezzlement scheme. Problem Albert owned and operated 40 coin laundries around town. As the business grew, he could no longer visit each one, empty the cash boxes, and deposit the receipts. Each location grossed about $140 to $160 per day, operating 365 days per yeargross receipts of about $2 million per year. Each of four part-time employees visited 10 locations, collecting the cash boxes and delivering them to Albert's office where he would count the coins and currency (from the change machine) and prepare a bank deposit. One of the employees skimmed $5 to $10 from each location visited each day. The daily theft does not seem like much, but at an average of $7.50 per day from each of 10 locations, totaled about $27,000 per year. If all four of the employees had stolen the same amount, the loss could have been over $100,000 per year. Audit Approach Controls over the part-time employees were nonexistent. There was no overt or covert surprise observation and no times when two people went to collect cash (thereby needing to agree, in collusion, to steal). There was no rotation of locations or other indications to the employees that Albert was concerned about control. With no controls, there is no test of control activities. Obviously, however, "thinking like a crook" leads to the conclusion that the employees could simply pocket money. Assuming that some employees are honest, periodically rotating the stores assigned to each employee and performing revenue comparisons (analytical procedures) on a store-bystore basis may be helpful. If revenues consistently decline for stores assigned to a specific employee, further investigation may be warranted. Required Based on the audit approach discussed, how might an auditor devise a procedure to catch this fraudulent scheme?

2.

problem5.62:Separation of Duties. Your small business client, Phillip's Computer Repair Shop, is experiencing financial difficulties and has to lay off one of its four employees in the accounting area. Phillip has asked you to determine what duties should be assigned to the three remaining employeesAbigail, Bryan, and Christo maintain the best separation of duties. Required: Assign the following 10 duties to each of the three employees.

a. Reconcile bank statement.

b. Open mail and list checks.

c. Prepare checks for Phillip's signature.

d. Prepare payroll checks.

e. Maintain personnel records.

f. Prepare deposit and take to bank.

g. Maintain petty cash.

h. Maintain accounts receivable records.

i. Maintain general ledger.

j. Reconcile accounts receivable records to general ledger account.

3.problem5.64:Impact of Sarbanes-Oxley Act. Your long-time client, Central Office Supply, has been rapidly expanding, and the board of directors is considering taking the company public. CEO Terry Puckett has heard that costs of operating a public company have increased significantly as a result of the Sarbanes-Oxley Act. Puckett is particularly concerned with reports that audit fees have doubled because of internal control provisions of the act and PCAOB Auditing Standard No. 2201. Puckett has asked you to explain the possible effects on the audit of complying with the requirements of Sarbanes-Oxley. Required: Draft a letter to Puckett outlining the changes in the company's responsibilities for internal control and changes in the audit due to Sarbanes-Oxley and PCAOB Auditing Standard No. 2201. $30.00