B D F 1 G Auditing Problems H J K L M N 2 3 Substantive Tests - Revenue/Receipt Cycle 4 5 6 You have completed your audit of the cash on hand and in banks in your audit of the Hoosier Company's financial 7 statementss for the year ended December 31, 2012, and noted the following: 8 9 a. The company maintains a general bank account at the National Bank and an imprest payroll bank account at The 10 City Bank. All checks are signed by the company president, Diedre Hoosier. 11 12 b. Data and reconciliations prepared by Donald Hume, the company bookkeeper, on November 30, 2012, indicated that 13 the payroll account had a Ps 1,000 general ledger and a bank balance with no in-transit or outstanding items, and the 14 general bank account had a Ps 12,405 general ledger balance with checks outstanding aggregating Ps 918 (No. 1202 for 15 Ps 575 and No. 1205 for Ps 343) and one deposit of Ps 492 in transit. 16 17 c. Your surprise cash count on January 2, 2013, revealed that customers' checks totalling $ 540 and a National Bank 18 deposit slip for that amount dated December 31, 2012 were in the company safe and that no cash was in transit to the 19 bank at that time. Your examination of the general account checkbook revealed check no. 1216 to be the first unused check. 20 21 22 d. Company general ledger accounts are prepared on a posting machine, and all transactions are posted in chronological 23 sequence. The ledger card for the general bank account is reproduced as follows: 24 25 General Ledger 26 General Bank Account (The National Rank)27 28 Ref Debits Credits Balance Ref Debits Credits Balance 29 30 Bal. 12,405 Fwd 14,187 31 12-1 496 12,901 RT 241 13,946 32 1206 1,675 11,226 1213 350 13,596 33 1207 645 10,581 D 2,072 11,524 34 12-6 832 11,413 12-22 1,513 13,037 35 1208 1,706 9,707 1214 2,597 10,440 36 12-8 975 10,682 1215 1,739 8,701 37 1209 2,062 8,620 12-29 540 9,241 38 1210 3,945 4,675 12-31 942 10,183 39 1211 6,237 1,562 * 1216 1,120 9,063 40 12-12 8,045 6,483 22,892 26,234 41 12-15 9,549 16,032 42 1212 1,845 14,187 43 44 e. The December statements from both banks were delivered unopened to you. The City Bank statement contained 45 deposits for Ps 1,675; Ps 1,706; Ps 1,845; and Ps 2,597 and 72 paid checks totalling Ps 7,823. The National Bank statement is 46 reproduced as follows: 47 48 49 50 51 Date Charges Credits Balance52 53 30-Nov 12,831 54 1-Dec 492 13,323 55 5-Dec 1,675 267 RT 496 11,877 56 8-Dec 575 832 12,134 57 11-Dec 1,706 654 975 10,749 58 14-Dec 1,987 D 2,062 8,045 14,745 59 18-Dec 6,237 1,845 9,949 16,612 60 21-Dec 241 RT 546 RT 546 CM 16,371 67 22-Dec 2,072 D 1,513 15,812 62 26-Dec 2,597 13,215 63 28-Dec 362 4 DM 1,010 CM 13,859 64 29-Dec 12 DM 362 14,209 65 66 Total charges - Ps 22,842 Total credits - Ps 24,220 67 68 Legend: OD: Overdraft RT: Returned check DM: Debit Memo 69 CM: Credit Memo D: Draft 70 71 f. Cut-off statements were secured by you personally from both banks on January 8, 2013, and the National Bank Statement 72 is reproduced below: 73 74 Date Charges Credits Balance 75 29-Dec-2012 14,209 76 02-Jan-2013 1,739 3,945 540 9,065I H I u c I u ._ . I u I .. I . .. .\\ L .u. 77" 05-Jan-2013 350 942 9,65}Ir 78 79 g. You determine that the bank statements are correct except that the National Bank incorrectly charged a returned check 30 on December 21 but credited the account the same day. 81 32 h. The Ps 352 check charged by the National Bank on December 28 was check no. 2000 drawn payable to Hoosier Company 33 and endorsed "Hoosier Company by Donald Hume". Your investigation showed that the amount credited by the National 34 Bank on December 28 was an unauthorized transfer from the City Bank Payroll Account to the National Bank General 35 Account that had been made by the company's bookkeeper who made no related entry in the company's records. The 3'5 check was charged to Hoosier Company on January 2, 2013, on the cutoff statement from the City Bank. 8? 33 i. Drafts charged against the National Bank account were for trade acceptances that were signed by Deidre Hoosier and 39 issued to a supplier. 90 91 j. On December 28, a 60-day, 14 percent Ps 1,000 note was collected by the National Bank for Hoosier for a Ps 4 collection '32 fee. 93 94 k. The Ps 12 debit memo from the National Bank was a charge for printed checks. 95 9'5 l. Check No. 1213 was issued to replace Check No. 1205 when the latterwas reported not received by a vendor. Because 9:" of the delay in paying this account, Hoosier Company was no longer entitled to the 2% cash discount it had taken in '33 preparing the origina check. 99 '00 Required: 101 102 1. Reconcile the bank and books balances of the General Bank Account in the National Bank using the adjusted balances 103 method. 104 105 2. Prepare a proof of cash for December for Hoosier's General Bank Account in the National Bank. Your proof of cash 106 should show the computation of the adjusted balances for both the bank statement and the general ledger account of 107 the National Bank for cash in bank November 30, December receipts, December disbursements, and cash in bank 108 December 31. 109 110 111 112 After determining that the computer controls are valid, Hastings is reviewing the sales system of Rosco Corporation in order 113 to determine how a computerized audit program may be used to assist in performing tests of Rosco's sales records. 114 Rosco sells crude oil from one central location. All orders are received by mail and indicate the preassigned customer 115 identification number, desired quantity, proposed delivery date, method of payment, and shipping terms. Since price fluctuates 116 daily, orders do not indicate a price. Price sheets are printed daily, and details are stored in a permanent disk file. The details of 117 orders are also maintained in a permanent disk file. 118 Each morning the shipping clerk receives a computer printout that indicates details of customers' orders to be shipped that 119 day. After the orders have been shipped, the shipping details are inputted in the computer, which simultaneously updates the 120 sales journal, perpetual inventory records, accounts receivable, and sales accounts. 121 The details of all transactions, as well as daily updates, are maintained on disks that are available for use by Hastings in the 122 performance of the audit. 123 124 Required:124 Required: 125 126 1. How may computerized audit programs be used by Hastings to perform substantive tests of Rosco's sales records in their 127 machine-readable form? 128 129 2. After having performed these tests with the assistance of the computer, what other auditing procedures should Hastings 130 perform in order to complete the examination of Rosco's sales records? 131 132 133