Question
Oryx Limited - 10 marks As part of your audit of Oryx Limited, a company that sells industrial supplies, your firm Left and Right CPA
Oryx Limited - 10 marks
As part of your audit of Oryx Limited, a company that sells industrial supplies, your firm Left and Right CPA has conducted computer-assisted audit tests using ACL (Audit Command Language) on the accounts receivables transaction file. Left and Right CPAs audited the sales and accounts receivable accounts of Oryx on a sample basis.
Accounts Receivable:
There were 2,000 customer accounts in the subsidiary ledger with a total recorded value of $375,000 for the year ended 31 December 2015. As part of the audit program, Left and Right selected a sample of 100 customer accounts having a recorded value of $20,000. They performed the audit procedures and determined that the audited amount of the customer accounts that was sampled totaled to $19,000. Tolerable misstatement was set at $25,000.
Sales Transactions:
Additionally, the auditors used ACL to generate the following report that extracted all sales transactions greater than $5,000:
EXTRACT RECORD IF Amount >= 5,000.00
Input: Records: 339Output: Records: 17
Invoice
Number
Invoice
Date
Product
Number
Product
Class
Quantity
Invoice
Amount
12858
01/06/2015
060112296
06
977
10.942.40
12874
01/25/2015
090081001
09
38
5,970.40
12899
02/16/2015
090585322
09
95
13,091.00
12913
03/01/2015
090669611
09
776
6,984.00
12917
03/05/2015
080935428
08
174
7.697.76
13002
06/06/2015
010226620
01
501
5,410.80
13013
06/18/2015
010102840
01
135
5,319.00
13033
07/09/2015
052208805
05
977
5,979.24
13042
07/17/2015
080935428
08
182
8,051.68
13065
08/18/2015
090507811
09
871
7,037.68
13087
09/08/2015
090585322
09
275
37,895.00
13089
09/09/2015
052720615
05
245
10,045.00
13107
09/30/2015
090585322
09
56
7,716.80
13152
11/16/2015
052720615
05
141
5,781.00
13163
12/01/2015
024133112
02
513
5,437.80
13170
12/04/2015
024133112
02
794
8,416.40
13183
12/13/2015
010155170
01
724
5,104.20
7,474
156,880.16
Required:
Use the Case Facts above to outline the answers for the following. Any answer with no application to the case will be awarded zero marks
A) Calculate the projected misstatement based on the results of the representative sample from the population of accounts receivables. Evaluate the results to determine if there could be a material misstatement of accounts receivables.(2 Marks)
B) Name and describe the type of sample generated from the ACL extract report above relating to the sales transactions. Describe three advantages or disadvantages of this type of a sample.(4 marks)
C)Assume that the last four invoices of the ACL report had not been paid by the customers so they are included in the accounts receivable balance as of December 31, 2015.
Provide two SPECIFIC balance-related audit objectives that you could use to test these unpaid accounts receivable invoices. For each specific balance-related audit objective that you describe, state the risk of material misstatement (RMM) to Oryx.(4 marks)
Specific balance-related audit objective(1 mark)
Risk of Material Misstatement (ROMM) (1 mark
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Using Microsoft Excel And Access 2013 For Accounting
Authors: Glenn Owen
4th Edition
1305161858, 9781305161856
