Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Additionally, your audit team has collected the following information on some additional aspects on how the company works. When purchase department orders materials, an electronic

image text in transcribedimage text in transcribedimage text in transcribed

Additionally, your audit team has collected the following information on some additional aspects on how the company works. When purchase department orders materials, an electronic copy of the purchase order is sent to the receiving department. During the delivery of materials, the receiving clerk records the receipt of shipment on this purchase order and then sends the purchase order to the accounting department, where it is used to record materials purchased and accounts payable. The materials are transported to the storage area and the additional purchased quantities are recorded on storage records. Considering the procedure for the bank reconciliation the audit team has decided to perform the bank reconciliation and has collected the following information. General Ledger Bank Statement Beginning balance 1/12/20 7,655 9,500 Deposits 25,545 Cash receipts journal 26,658 Checks cleared -25,841 Cash disbursements journal -23,957 October bank service charge -114 Note paid directly -5,700 Ending balance 31/12/20 10,356 3,390 November 30 Bank Reconciliation Information in General Ledger and Bank Statement Balance per bank Deposits in transit Outstanding checks Balance per books 9,500 730 2,575 7,655 Based on the analysis of the documentation, there are specific information to consider during the reconciliation: A check for 1,265 cleared the bank but had not been recorded in the cash disbursements journal. It was for an acquisition of inventory. The company uses the periodic-inventory method. A check for 656 was charged to the company but had been written on a different company's bank account. A note for 5,500, plus interest, was paid directly to the bank under an agreement signed four months ago. The note payable was recorded at 5,500 on company book. At the end of your audit of the financial statements, the audit team find out an aggregated misstatement in the account receivable for an amount of 35,050. The level of materiality for the financial statements is 3% of the income from operation and the performance materiality is the 60% of the materiality level. Reviewing all the information collected the audit team is ready to suggest the possible opinion to issue in the audit report. Question 2 the a) Describe the deficiencies in the purchase and delivery cycle of the company and for each deficiency, state the type(s) of misstatement(s) that is (are) likely to result. (14 marks) b) Identify the transactions related audit objectives related with the deficiencies and describe the audit procedures you will apply for detecting possible misstatements. (8 marks) c) Suggests possible internal control procedures the company can apply for these deficiencies. (8 marks) Total marks 30 Additionally, your audit team has collected the following information on some additional aspects on how the company works. When purchase department orders materials, an electronic copy of the purchase order is sent to the receiving department. During the delivery of materials, the receiving clerk records the receipt of shipment on this purchase order and then sends the purchase order to the accounting department, where it is used to record materials purchased and accounts payable. The materials are transported to the storage area and the additional purchased quantities are recorded on storage records. Considering the procedure for the bank reconciliation the audit team has decided to perform the bank reconciliation and has collected the following information. General Ledger Bank Statement Beginning balance 1/12/20 7,655 9,500 Deposits 25,545 Cash receipts journal 26,658 Checks cleared -25,841 Cash disbursements journal -23,957 October bank service charge -114 Note paid directly -5,700 Ending balance 31/12/20 10,356 3,390 November 30 Bank Reconciliation Information in General Ledger and Bank Statement Balance per bank Deposits in transit Outstanding checks Balance per books 9,500 730 2,575 7,655 Based on the analysis of the documentation, there are specific information to consider during the reconciliation: A check for 1,265 cleared the bank but had not been recorded in the cash disbursements journal. It was for an acquisition of inventory. The company uses the periodic-inventory method. A check for 656 was charged to the company but had been written on a different company's bank account. A note for 5,500, plus interest, was paid directly to the bank under an agreement signed four months ago. The note payable was recorded at 5,500 on company book. At the end of your audit of the financial statements, the audit team find out an aggregated misstatement in the account receivable for an amount of 35,050. The level of materiality for the financial statements is 3% of the income from operation and the performance materiality is the 60% of the materiality level. Reviewing all the information collected the audit team is ready to suggest the possible opinion to issue in the audit report. Question 2 the a) Describe the deficiencies in the purchase and delivery cycle of the company and for each deficiency, state the type(s) of misstatement(s) that is (are) likely to result. (14 marks) b) Identify the transactions related audit objectives related with the deficiencies and describe the audit procedures you will apply for detecting possible misstatements. (8 marks) c) Suggests possible internal control procedures the company can apply for these deficiencies. (8 marks) Total marks 30

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Cost Accounting Foundations And Evolutions

Authors: Michael R. Kinney, Cecily A. Raiborn

7th Edition

0324560559, 978-0324560558

More Books

Students also viewed these Accounting questions