Problem 3

How does computing the amount paid in commissions to Metaphor agents in Problem 2 help an auditor verify the management assertion of completeness?

Chapter 3 ACL Exercises and Problems Return to Menu

There is limited technical assistance available for the educational version of ACL, please contact technical support: 604-669-4225; <..o>; http://www.acl.com/supportcenter/

Tutorial Assignment (Estimated time to complete the Chapter 3 tutorial is 20-30 minutes.)

Read and complete the tasks in Chapter 3: Set up Your Project of the ACL in Practice file.

Hint: Staying actively involved while completing the tutorial assignment will help you to complete the ACL problems more efficiently. You may find it helpful to review the assigned problems before completing the ACL in Practice exercises.

For instructions on accessing the ACL in Practice please see earlier assignments.

(Note: Unless otherwise instructed, please submit your answers to the following exercises and problems to your instructor in a word processing document.)

Chapter 3 Tutorial Exercises: 1-2

There are two exercises within the Chapter 3 tutorial from the ACL in Practice file (ACL_in_Practice.pdf), in the folder where ACL manuals are saved on your hard drive (e.g., C:\ACLManualsV9). Your instructor will inform you which, if any, of the exercises to complete and submit.

Messier/Glover/Prawitt End-of-Chapter 3, ACL Problems

Problem 1

Edit the layout of the Employee_List table to form a new column for total compensation (salary plus bonus). Now determine how many employees earned more than $85,000 in total compensation in 2002.

Problem 2

Roger Company is a mid-size company located in the Midwest that handles the distribution of various home and garden products. You are part of the engagement team assigned to audit the financial statements of Roger Company. Roger Company has been a client of your firm for many years, and your firm has rarely encountered any problems with them. However, the engagement partner has made it very clear to you that there is no room for mistakes. Your tasks as one of the auditors on the engagement are outlined below and in other problems of the remaining chapters.

Please download the Roger Company ACL data files, found under Course-Wide Content, ACL Content folder on the Student Edition of your text?s Online Learning Center, www.mhhe.com/messier9e. The Roger Company files are already in ACL format; however the files must first be extracted or ?unzipped.? After unzipping the files, click on FILE from the menu toolbar and use the OPEN PROJECT command to navigate to where you have saved the ?Roger Company 9e? file and open the project.

Net income before taxes at Roger Company is stable, predictable, and representative of its size. Thus, the auditors at Roger Company calculate materiality to be 5 percent of net income before taxes. Net income before taxes at Roger Company for fiscal 2013 is $1,388,500. Determine materiality for the audit of Roger Company?s 2013 financial statements. Use ACL to determine if the reported AR account balance, $487,000, is materially different from the detailed files in Rogers Company AR table. Define tolerable misstatement as 60 percent of materiality. What might cause differences between the number reported in the financial statements and the details in the file?

Problem 3

As a quality control procedure, management at Roger Company reviews each approved vendor at least once a year. In the reviews, management compares pricing across vendors, retests products being purchased from vendors to ensure they meet quality control standards, and performs testing to ensure purchasing personnel are not inappropriately favoring a vendor or potentially colluding with vendors (e.g., receiving kickbacks from the vendors). Use ACL to check the Roger Company Vendors table to make sure each vendor has been reviewed sometime since January 1, 2013.

1. Open the Roger Company Vendors table
2. Click on the Edit View Filter button to open the Edit view filter dialogue box

1. In the Available Fields list, double-click on the Last_Review field
2. Click on the ? sign
3. Click on the Date button to display the date selector
4. Click on the down arrow, find January 1, 2013, click on it, and click OK
5. Click OK
6. Which vendors have not been reviewed since January 1, 2013? When was the last review for those vendors?

Chapter 4 ACL Exercises and Problems Return to Menu

There is limited technical assistance available for the educational version of ACL, please contact technical support: 604-669-4225; <..o>; http://www.acl.com/supportcenter/

Tutorial Assignment (Estimated time to complete the Chapter 4 tutorials is 20-30 minutes.)

Read and complete the tasks in Chapter 4: Begin Your Analysis of the ACL in Practice file.

Hint: Staying actively involved while completing the tutorial assignment will help you to complete the ACL problems more efficiently. You may find it helpful to review the assigned problems before completing the ACL in Practice assignment.

For instructions on accessing the ACL in Practice please see earlier assignments.

(Note: Unless otherwise instructed, please submit your answers to the following exercises and problems to your instructor in a word processing document.)

Chapter 4 Tutorial Exercises: 1-8

There are eight exercises at the end of the Chapter 4 tutorial from the ACL in Practice file (ACL_in_Practice.pdf), in the folder where ACL manuals are saved on your hard drive (e.g., C:\ACLManualsV9). Your instructor will inform you which, if any, of the exercises to complete and submit.

Messier/Glover/Prawitt End-of-Chapter 4, ACL Problems

As introduced above in the ACL problems for Chapter 3, Roger Company is a mid-size company located in the Midwest that handles the distribution of various home and garden products. You are part of the engagement team assigned to audit the financial statements of Roger Company. Roger Company has been a client of your firm for many years, and your firm has rarely encountered any problems with them. However, the engagement partner has made it very clear to you that there is no room for mistakes. Your tasks as one of the auditors on the engagement are outlined below and in other problems of the remaining chapters.

Please download the Roger Company ACL files, if you haven?t already. They are found in the ACL Content folder under Course-Wide Content on the Student Edition of your text?s Online Learning Center. See instructions for opening the Roger Company files in the Chapter 3 assignment above.

Problem 1

Roger Company has a policy that their allowance for uncollectible accounts should be 50% of the amount in the 60-90 day past due category plus 75% of the amount in the >90 day past due category as of the reporting date (in this case December 31. Use the Roger Company AR table in ACL and the Analyze >> Age command to re-compute the allowance for uncollectible accounts. In addition to re-computing the allowance for uncollectible accounts, report the results of the aging table that you are asked to complete.

1. Once in the Roger Company AR Table, click the Analyze drop down menu.
2. Click Age.
3. In the Age dialog box, click the Age On button and make sure Due_Date is the selected field.
4. Change the cutoff date to December 31, 2013.
5. In the Aging Periods box, delete the numbers 10000 and 120 so that your table will compute a >90 day past due total.
6. Highlight the Amount field under the Subtotal Fields column.
7. Click OK.

Problem 2

Assuming no cash is collected on past due accounts, how much will be more than 60 days past due as of January 31, 2014?

Chapter 5 ACL Exercises and Problems Return to Menu

There is limited technical assistance available for the educational version of ACL, please contact technical support: 604-669-4225; <..o>; http://www.acl.com/supportcenter/

Tutorial Assignment (Estimated time to complete is 30-40 minutes.)

Read and complete the tasks in Chapter 5: Examine Expense Patterns of the ACL in Practice file.

Hint: Staying actively involved while completing the tutorial assignment will help you to complete the ACL problems more efficiently. You may find it helpful to review the assigned problems before completing the ACL in Practice assignment.

For instructions on accessing the ACL in Practice please see earlier assignments.

(Note: Unless otherwise instructed, please submit your answers to the following exercises and problems to your instructor in a word processing document.)

Chapter 5 Tutorial Exercises: 1-6

There are six exercises (five within the chapter, one at the end) in the Chapter 5 tutorial from the ACL in Practice file (ACL_in_Practice.pdf), in the folder where ACL manuals are saved on your hard drive (e.g., C:\ACLManualsV9). Your instructor will inform you which, if any, of the exercises to complete and submit.

Messier/Glover/Prawitt End-of-Chapter 5, ACL Problems

As introduced above in the ACL problems for Chapter 3, Roger Company is a mid-size company located in the Midwest that handles the distribution of various home and garden products. You are part of the engagement team assigned to audit the financial statements of Roger Company. Roger Company has been a client of your firm for many years, and your firm has rarely encountered any problems with them. However, the engagement partner has made it very clear to you that there is no room for mistakes. Your tasks as one of the auditors on the engagement are outlined below and in other problems of the remaining chapters.

Please download the Roger Company ACL files, if you haven?t already. They are found in the ACL Content folder under Course-Wide Content on the Student Edition of your text?s Online Learning Center. See instructions for opening the Roger Company files in the Chapter 3 assignment above.

Problem 1

How many inventory items at Roger Company have a market value that exceeds $10,000? What is the total market value of those items? How many inventory items at Roger Company have a value-at-cost in excess of $10,000? What is the total value-at-cost of those items?

Problem 2

Use information from Roger Company to determine how many inventory items have a market value lower than their original value-at-cost. What is the total market value of those items? What is the total value-at-cost of those items?

Chapter 6 ACL Exercises and Problems Return to Menu

There is limited technical assistance available for the educational version of ACL, please contact technical support: 604-669-4225; <..o>; http://www.acl.com/supportcenter/

Tutorial Assignment (Estimated time to complete is 40-60 minutes)

Read and complete the tasks in Chapter 6: Analyze Transactions of the ACL in Practice file.

Hint: Staying actively involved while completing the tutorial assignment will help you to complete the ACL problems more efficiently. You may find it helpful to review the assigned problems before completing the ACL in Practice assignment.

For instructions on accessing the ACL in Practice please see earlier assignments.

(Note: Unless otherwise instructed, please submit your answers to the following exercises and problems to your instructor in a word processing document. Roger Company files can be downloaded from the Course-Wide Content on the Student Edition of your text?s Online Learning Center.)

Chapter 6 Tutorial Exercises: 1-5

There are five exercises at the end of the Chapter 6 tutorial from the ACL in Practice (ACL_in_Practice.pdf), in the folder where ACL manuals are saved on your hard drive (e.g., C:\ACLManualsV9). Your instructor will inform you which, if any, of the exercises to complete and submit.

Messier/Glover/Prawitt End-of-Chapter 6, ACL Problems

As introduced above in the ACL problems for Chapter 3, Roger Company is a mid-size company located in the Midwest that handles the distribution of various home and garden products. You are part of the engagement team assigned to audit the financial statements of Roger Company. Roger Company has been a client of your firm for many years, and your firm has rarely encountered any problems with them. However, the engagement partner has made it very clear to you that there is no room for mistakes. Your tasks as one of the auditors on the engagement are outlined below and in other problems of the remaining chapters.

Please download the Roger Company ACL files, if you haven?t already. They are found in the ACL Content folder under Course-Wide Content on the Student Edition of your text?s Online Learning Center. See instructions for opening the Roger Company files in the Chapter 3 assignment above.

Problem 1

After reviewing a list of parties related to Roger Company, you notice that the customers with customer numbers 803882 and 512198 are related to the owners of the company. Please use the Roger Company AR table to determine the amount of accounts receivable that relates to sales made to these related-party customers. What percent of total accounts receivable are made up of sales to these two related-party customers?

Problem 2

As part of the audit of Accounts Payable, you want to identify all invoices (Invoice_Amount) greater than $50,000 so that you can vouch the transaction to original documentation (i.e., approved purchase order, receiving records). Use ACL to identify all Accounts Payable invoices greater than $50,000 and compute the total value of those transactions. Why is it important for auditors to determine if large purchases are properly authorized?

Chapter 7 ACL Exercises and Problems Return to Menu

There is limited technical assistance available for the educational version of ACL, please contact technical support: 604-669-4225; <..o>; http://www.acl.com/supportcenter/

Tutorial Assignment (Estimated time to complete is 20-30 minutes)

Read and complete the tasks in Chapter 7: Validate, Correct, and Extract Data of the ACL in Practice file.

Hint: Staying actively involved while completing the tutorial assignment will help you to complete the ACL problems more efficiently. You may find it helpful to review the assigned problems before completing the ACL in Practice assignment.

For instructions on accessing the ACL in Practice please see earlier assignments.

(Note: Unless otherwise instructed, please submit your answers to the following exercises and problems to your instructor in a word processing document. Roger Company files can be downloaded from the Course-Wide Content on the Student Edition of your text?s Online Learning Center.)

Chapter 7 Tutorial Exercises: 1-7

There are seven exercises (3 within the chapter and 4 at the end) in Chapter 7 tutorial from the ACL in Practice file (ACL_in_Practice.pdf), in the folder where ACL manuals are saved on your hard drive (e.g., C:\ACLManualsV9). Your instructor will inform you which, if any, of the exercises to complete and submit.

Messier/Glover/Prawitt End-of-Chapter 7, ACL Problems

As introduced above in the ACL problems for Chapter 3, Roger Company is a mid-size company located in the Midwest that handles the distribution of various home and garden products. You are part of the engagement team assigned to audit the financial statements of Roger Company. Roger Company has been a client of your firm for many years, and your firm has rarely encountered any problems with them. However, the engagement partner has made it very clear to you that there is no room for mistakes. Your tasks as one of the auditors on the engagement are outlined below and in other problems of the remaining chapters.

Please download the Roger Company ACL files, if you haven?t already. They are found in the ACL Content folder under Course-Wide Content on the Student Edition of your text?s Online Learning Center. See instructions for opening the Roger Company files in the Chapter 3 assignment above.

Problem 1

Roger Company?s policy is to not ship goods unless a valid purchase order has been received. However, based on information obtained during your walk through to confirm your understanding of processes and controls, you learned that occasionally a rush order is received via telephone and the goods are shipped before receiving the purchase order. Rush orders are only processed for existing customers. When rush orders are received the sales person taking the order completes a ?Rush Order? form which is then approved by the sales department supervisor. The ?Rush Order? form is then attached to the purchase order when it is received and the details of the two forms (i.e., product and quantity) are compared. To test the effectiveness of the controls around rush orders, you want to identify all instances where product is shipped before a purchase order is received. Using the Roger Company shipping file, determine the number of invoices related to orders that were shipped before a purchase order was received.

Problem 2

In discussions with the order fulfillment and shipping departments, you learn that it is common for a partial or ?split? shipment to go out because of an insufficient quantity of items in stock to fulfill the customer order. However, controls should prohibit shipping a higher quantity than was ordered. Using information from Roger Company?s Shipping file, determine how many records contain fields where the quantity shipped exceeds the quantity ordered.

Chapter 8 ACL Problems Return to Menu

There is limited technical assistance available for the educational version of ACL, please contact technical support: 604-669-4225; <..o>; http://www.acl.com/supportcenter/

(Note: Unless otherwise instructed, please submit your answers to the following problems to your instructor in a word processing document.)

Messier/Glover/Prawitt End-of-Chapter 8, ACL Problems

As introduced above in the ACL problems for Chapter 3, Roger Company is a mid-size company located in the Midwest that handles the distribution of various home and garden products. You are part of the engagement team assigned to audit the financial statements of Roger Company. Roger Company has been a client of your firm for many years, and your firm has rarely encountered any problems with them. However, the engagement partner has made it very clear to you that there is no room for mistakes. Your tasks as one of the auditors on the engagement are outlined below and in other problems of the remaining Chapters.

Please download the Roger Company ACL files, if you haven?t already. They are found in the ACL Content folder under Course-Wide Content on the Student Edition of your text?s Online Learning Center. See instructions for opening the Roger Company files in the Chapter 3 assignment above.

Problem 1

Use ACL to determine the sample size an auditor should use for attributes sampling given the criteria listed below:

1. With any ACL project (e.g., Roger Company) open, choose Sampling on the menu toolbar
2. Click on Calculate Sample Size
3. Choose the Record option

• Confidence is 95
• Population is 1000
• Upper Error Limit (%) is 8 (this is tolerable error)
• Expected Error Rate (%) is 3

1. Click Calculate
2. What is the recommended sample size?

Problem 2

How would the sample size change if all sample-size inputs listed in Problem 1 stayed the same with the exceptions listed below? Please evaluate each item independently by resetting the inputs to those listed in Problem 1 and changing only the one factor listed in each item below. (Hint: If you use the Calculate button rather than the OK button the sample size window will stay open).

1. Confidence dropped to 90 percent?
2. Population increased to 500,000?
3. Expected Error Rate (%) increased to 4?
4. Upper Error Limit (%) decreases to 7?
5. Upper Error Limit (%) increases to 15?

Problem 3

Using your results from Problem 2 above:

1. Which of the following four input factors?confidence, population, upper error limit, or expected error rate?has the smallest effect on the sample size?
2. Which two factors appear to have the greatest effect on sample size?
3. Go into ACL?s sampling size tool and input the factors listed in Problem 1 and then experiment with increasingly larger expected error rates. What happens as the expected error rate is nearly as large as the upper error limit or tolerable error? Why does this happen? Problem 4For the following three control attributes, you want to be 90 percent confident that the population deviation rate does not exceed 7.5 percent. Attribute 1-The purchase order was approved (purchasing department stamp provides evidence)Attribute 2-The purchase order, receiving report, and vendor invoice are included in each voucher packetAttribute 3-The accounts payable department compared product and quantities across the three documents (initials by an accounts payable clerk and auditor reperformance provide evidence) You tested a sample of 52 voucher packages and discovered the following deviations:

• Attribute 1: 2 deviations
• Attribute 2: 1 deviation
• Attribute 3: 0 deviations

With any ACL project open (e.g., Roger Company) evaluate the results of your testing by:

1. Select Sampling >> Evaluate Error
2. Make sure Record is the selected sample type
3. Enter the applicable parameters (e.g., Confidence is 90 and Sample Size is 52, Number of Errors or deviations listed above)
4. Click OK

What is the upper error limit frequency for each attribute?

Based on the results of your controls testing, which controls are considered effective? Please explain why or why not?

Problem 5

Use ACL to complete problems 8-27 and 8-28 in your book. In ACL, ?upper error limit? is the same as ?tolerable deviation rate? and ?expected error rate? is the same as ?expected population deviation rate.? For problem 8-27, does the population amount you enter change the results? For 8-28, use the sample sizes computed by ACL in 8-27. ACL?s sample sizes and upper error limit frequency will differ from those computed using the tables in the textbook. Did the differences lead to different conclusions or auditor decisions?

Chapter 9 ACL Problems Return to Menu

There is limited technical assistance available for the educational version of ACL, please contact technical support: 604-669-4225; <..o>; http://www.acl.com/supportcenter/

(Note: Unless otherwise instructed, please submit your answers to the following problems to your instructor in a word processing document.)

Messier/Glover/Prawitt End-of-Chapter 9, ACL Problems

As introduced above in the ACL problems for Chapter 3, Roger Company is a mid-size company located in the Midwest that handles the distribution of various home and garden products. You are part of the engagement team assigned to audit the financial statements of Roger Company. Roger Company has been a client of your firm for many years, and your firm has rarely encountered any problems with them. However, the engagement partner has made it very clear to you that there is no room for mistakes. Your tasks as one of the auditors on the engagement are outlined below and in other problems of the remaining chapters.

Please download the Roger Company ACL files, if you haven?t already. They are found in the ACL Content folder under Course-Wide Content on the Student Edition of your text?s Online Learning Center. See instructions for opening the Roger Company files in the Chapter 3 assignment above.

Problem 1

In addition to determining sample size, ACL can also select a random sample for you. Draw a sample of Accounts Receivable (AR) transactions from the Roger Company AR table assuming the confidence is 95, the upper error limit is 9 percent, and the expected error rate is 5 percent.

1. Open the Roger Company AR table
2. Select Sampling >> Sample Records and the Sample window appears
3. Make sure Record is the chosen Sample Type
4. Under Sample Parameters, click on the Random option
5. Click on the Size button so the Size Dialogue box opens
6. Enter the parameters as specified above (Note: The Population field should automatically have a value in it.)
7. Click on Calculate, click on OK
8. In the To field, type ?Roger AR Sample?
9. Click OK
10. How many records are in the new Roger Company AR Sample table?

Problem 2

Assuming that the electronic data were difficult to obtain and that the client compiled the electronic data only for the sample you selected in Problem 1, evaluate the effectiveness of the control that the invoice date should always precede the due date.

1. Create a filter in the Roger AR Sample table for the control described above
2. How many exceptions are there to the control above?
3. Select Sampling from the menu toolbar and click on Evaluate Error
4. Make sure Record is the selected sample type
5. Enter the appropriate parameters (i.e., Confidence 95, Sample Size 175, and the number of exceptions you observed)
6. Click OK
7. What is the upper error limit frequency?

Based on the results from the operations you completed above, can the control be considered effective? Why or why not?

Problem 3

Determine an appropriate sample size to test the Roger Company AR table using monetary unit sampling using the following inputs:

1. Open the Roger Company AR table
2. Sum the Amount field
3. Select Sampling >> Calculate Sample Size and the Size window appears
4. Make sure Monetary is the chosen on the Main tab
5. Input the following:

• Confidence is 92 percent
• Population is the sum of the Amount field
• Materiality is 10000
• Expected Total Errors is 1500

1. Click on Calculate
2. What is the appropriate sample size?

Problem 4

Create a Roger Company MUS Sample table (or file) by selecting Sample >> Sample Records. Make sure MUS is the chosen sample type and Fixed Interval is the chosen option under Sample Parameters. Enter the appropriate Interval value from the results in Problem 3 (find interval under the calculated sample size), and chose 350 as the Start. Ignore the Cutoff field. Save the table as ?Roger Company MUS Sample.? How many records are in the sample table? Why is the sample size different from what was calculated in Problem 3?

Problem 5

Use ACL to complete questions b and c of problem 9-21 in your textbook. For problem ?b? Use the Sampling >> Calculate Sample Size command. Take note of the interval in the results to use for problem c. For problem ?c? use the Sampling >> Evaluate Error command. Input the data from problem ?b? for confidence and the interval from the ACL results when you completed problem ?b.? Enter book value and error amounts in the ?Errors? box for each misstatement discovered. Follow the notation ?Item amount, Error? where ?Item amount? is the book value and ?Error? is the error amount or audit difference observed.

Chapter 10 ACL Problems Return to Menu

There is limited technical assistance available for the educational version of ACL, please contact technical support: 604-669-4225; <..o>; http://www.acl.com/supportcenter/

(Note: Unless otherwise instructed, please submit your answers to the following problems to your instructor in a word processing document.)

Messier/Glover/Prawitt End-of-Chapter 10, ACL Problems

As introduced above in the ACL problems for Chapter 3, Roger Company is a mid-size company located in the Midwest that handles the distribution of various home and garden products. You are part of the engagement team assigned to audit the financial statements of Roger Company. Roger Company has been a client of your firm for many years, and your firm has rarely encountered any problems with them. However, the engagement partner has made it very clear to you that there is no room for mistakes. Your tasks as one of the auditors on the engagement are outlined below and in other problems of the remaining chapters.

Please download the Roger Company ACL files, if you haven?t already. They are found in the ACL Content folder under Course-Wide Content on the Student Edition of your text?s Online Learning Center. See instructions for opening the Roger Company files in the Chapter 3 assignment above.

Problem 1

Possible misstatements due to lack of appropriate sales authorization include selling goods at unauthorized prices, selling amounts that exceed customer credit limits, and/or selling to customers who are bad credit risks. Roger Company?s policy does permit sales in excess of credit limits, but only with management approval.

a. Use the Roger Company?s AR table to determine how many sales were made that exceeded customer credit limits.

b. Determine how many of the sales in part "a" (where the credit limit was surpassed) were not approved.

Problem 2

Possible misstatements that may occur during the cash receipts process result from cash receipts being received, but not recorded (which could facilitate embezzlement). A control technique that is used to mitigate the risk of such misstatements is to segregate the duties of the accounts receivable department, general ledger accounting records, and cash receipts. The employee who completed each duty is required to sign his/her initials, and evidence of this has been provided for you in the AR table. In each transaction, proper segregation of duties is accomplished when no two duties have been completed by the same person. Use ACL and the information from Roger Company AR table to determine in which transactions segregation of duties was not properly implemented.

Problem 3 How does computing the amount paid in commissions to Metaphor agents in Problem 2 help an auditor verify the management assertion of completeness? Chapter 3 ACL Exercises and Problems Return to Menu There is limited technical assistance available for the educational version of ACL, please contact technical support: 604-669-4225; info@acl.com; http://www.acl.com/supportcenter/ Tutorial Assignment (Estimated time to complete the Chapter 3 tutorial is 20-30 minutes.) Read and complete the tasks in Chapter 3: Set up Your Project of the ACL in Practice file. Hint: Staying actively involved while completing the tutorial assignment will help you to complete the ACL problems more efficiently. You may find it helpful to review the assigned problems before completing the ACL in Practice exercises. For instructions on accessing the ACL in Practice please see earlier assignments. (Note: Unless otherwise instructed, please submit your answers to the following exercises and problems to your instructor in a word processing document.) Chapter 3 Tutorial Exercises: 1-2 There are two exercises within the Chapter 3 tutorial from the ACL in Practice file (ACL_in_Practice.pdf), in the folder where ACL manuals are saved on your hard drive (e.g., C:\\ACLManualsV9). Your instructor will inform you which, if any, of the exercises to complete and submit. Messier/Glover/Prawitt End-of-Chapter 3, ACL Problems Problem 1 Edit the layout of the Employee_List table to form a new column for total compensation (salary plus bonus). Now determine how many employees earned more than $85,000 in total compensation in 2002. Problem 2 Roger Company is a mid-size company located in the Midwest that handles the distribution of various home and garden products. You are part of the engagement team assigned to audit the financial statements of Roger Company. Roger Company has been a client of your firm for many years, and your firm has rarely encountered any problems with them. However, the engagement partner has made it very clear to you that there is no room for mistakes. Your tasks as one of the auditors on the engagement are outlined below and in other problems of the remaining chapters. Please download the Roger Company ACL data files, found under Course-Wide Content, ACL Content folder on the Student Edition of your text's Online Learning Center, www.mhhe.com/messier9e. The Roger Company files are already in ACL format; however the files must first be extracted or \"unzipped.\" After unzipping the files, click on FILE from the menu toolbar and use the OPEN PROJECT command to navigate to where you have saved the \"Roger Company 9e\" file and open the project. Net income before taxes at Roger Company is stable, predictable, and representative of its size. Thus, the auditors at Roger Company calculate materiality to be 5 percent of net income before taxes. Net income before taxes at Roger Company for fiscal 2013 is $1,388,500. Determine materiality for the audit of Roger Company's 2013 financial statements. Use ACL to determine if the reported AR account balance, $487,000, is materially different from the detailed files in Rogers Company AR table. Define tolerable misstatement as 60 percent of materiality. What might cause differences between the number reported in the financial statements and the details in the file? Problem 3 As a quality control procedure, management at Roger Company reviews each approved vendor at least once a year. In the reviews, management compares pricing across vendors, retests products being purchased from vendors to ensure they meet quality control standards, and performs testing to ensure purchasing personnel are not inappropriately favoring a vendor or potentially colluding with vendors (e.g., receiving kickbacks from the vendors). Use ACL to check the Roger Company Vendors table to make sure each vendor has been reviewed sometime since January 1, 2013. 1. Open the Roger Company Vendors table 2. Click on the Edit View Filter button to open the Edit view filter dialogue box 3. 4. 5. 6. 7. 8. In the Available Fields list, double-click on the Last_Review field Click on the \"90 day past due category as of the reporting date (in this case December 31. Use the Roger Company AR table in ACL and the Analyze >> Age command to re-compute the allowance for uncollectible accounts. In addition to re-computing the allowance for uncollectible accounts, report the results of the aging table that you are asked to complete. 1. Once in the Roger Company AR Table, click the Analyze drop down menu. 2. Click Age. 3. In the Age dialog box, click the Age On button and make sure Due_Date is the selected field. 4. Change the cutoff date to December 31, 2013. 5. In the Aging Periods box, delete the numbers 10000 and 120 so that your table will compute a >90 day past due total. 6. Highlight the Amount field under the Subtotal Fields column. 7. Click OK. Problem 2 Assuming no cash is collected on past due accounts, how much will be more than 60 days past due as of January 31, 2014? Chapter 5 ACL Exercises and Problems Return to Menu There is limited technical assistance available for the educational version of ACL, please contact technical support: 604-669-4225; info@acl.com; http://www.acl.com/supportcenter/ Tutorial Assignment (Estimated time to complete is 30-40 minutes.) Read and complete the tasks in Chapter 5: Examine Expense Patterns of the ACL in Practice file. Hint: Staying actively involved while completing the tutorial assignment will help you to complete the ACL problems more efficiently. You may find it helpful to review the assigned problems before completing the ACL in Practice assignment. For instructions on accessing the ACL in Practice please see earlier assignments. (Note: Unless otherwise instructed, please submit your answers to the following exercises and problems to your instructor in a word processing document.) Chapter 5 Tutorial Exercises: 1-6 There are six exercises (five within the chapter, one at the end) in the Chapter 5 tutorial from the ACL in Practice file (ACL_in_Practice.pdf), in the folder where ACL manuals are saved on your hard drive (e.g., C:\\ACLManualsV9). Your instructor will inform you which, if any, of the exercises to complete and submit. Messier/Glover/Prawitt End-of-Chapter 5, ACL Problems As introduced above in the ACL problems for Chapter 3, Roger Company is a mid-size company located in the Midwest that handles the distribution of various home and garden products. You are part of the engagement team assigned to audit the financial statements of Roger Company. Roger Company has been a client of your firm for many years, and your firm has rarely encountered any problems with them. However, the engagement partner has made it very clear to you that there is no room for mistakes. Your tasks as one of the auditors on the engagement are outlined below and in other problems of the remaining chapters. Please download the Roger Company ACL files, if you haven't already. They are found in the ACL Content folder under Course-Wide Content on the Student Edition of your text's Online Learning Center. See instructions for opening the Roger Company files in the Chapter 3 assignment above. Problem 1 How many inventory items at Roger Company have a market value that exceeds $10,000? What is the total market value of those items? How many inventory items at Roger Company have a value-at-cost in excess of $10,000? What is the total value-at-cost of those items? Problem 2 Use information from Roger Company to determine how many inventory items have a market value lower than their original value-at-cost. What is the total market value of those items? What is the total value-at-cost of those items? Chapter 6 ACL Exercises and Problems Return to Menu There is limited technical assistance available for the educational version of ACL, please contact technical support: 604-669-4225; info@acl.com; http://www.acl.com/supportcenter/ Tutorial Assignment (Estimated time to complete is 40-60 minutes) Read and complete the tasks in Chapter 6: Analyze Transactions of the ACL in Practice file. Hint: Staying actively involved while completing the tutorial assignment will help you to complete the ACL problems more efficiently. You may find it helpful to review the assigned problems before completing the ACL in Practice assignment. For instructions on accessing the ACL in Practice please see earlier assignments. (Note: Unless otherwise instructed, please submit your answers to the following exercises and problems to your instructor in a word processing document. Roger Company files can be downloaded from the Course-Wide Content on the Student Edition of your text's Online Learning Center.) Chapter 6 Tutorial Exercises: 1-5 There are five exercises at the end of the Chapter 6 tutorial from the ACL in Practice (ACL_in_Practice.pdf), in the folder where ACL manuals are saved on your hard drive (e.g., C:\\ACLManualsV9). Your instructor will inform you which, if any, of the exercises to complete and submit. Messier/Glover/Prawitt End-of-Chapter 6, ACL Problems As introduced above in the ACL problems for Chapter 3, Roger Company is a mid-size company located in the Midwest that handles the distribution of various home and garden products. You are part of the engagement team assigned to audit the financial statements of Roger Company. Roger Company has been a client of your firm for many years, and your firm has rarely encountered any problems with them. However, the engagement partner has made it very clear to you that there is no room for mistakes. Your tasks as one of the auditors on the engagement are outlined below and in other problems of the remaining chapters. Please download the Roger Company ACL files, if you haven't already. They are found in the ACL Content folder under Course-Wide Content on the Student Edition of your text's Online Learning Center. See instructions for opening the Roger Company files in the Chapter 3 assignment above. Problem 1 After reviewing a list of parties related to Roger Company, you notice that the customers with customer numbers 803882 and 512198 are related to the owners of the company. Please use the Roger Company AR table to determine the amount of accounts receivable that relates to sales made to these related-party customers. What percent of total accounts receivable are made up of sales to these two related-party customers? Problem 2 As part of the audit of Accounts Payable, you want to identify all invoices (Invoice_Amount) greater than $50,000 so that you can vouch the transaction to original documentation (i.e., approved purchase order, receiving records). Use ACL to identify all Accounts Payable invoices greater than $50,000 and compute the total value of those transactions. Why is it important for auditors to determine if large purchases are properly authorized? Chapter 7 ACL Exercises and Problems Return to Menu There is limited technical assistance available for the educational version of ACL, please contact technical support: 604-669-4225; info@acl.com; http://www.acl.com/supportcenter/ Tutorial Assignment (Estimated time to complete is 20-30 minutes) Read and complete the tasks in Chapter 7: Validate, Correct, and Extract Data of the ACL in Practice file. Hint: Staying actively involved while completing the tutorial assignment will help you to complete the ACL problems more efficiently. You may find it helpful to review the assigned problems before completing the ACL in Practice assignment. For instructions on accessing the ACL in Practice please see earlier assignments. (Note: Unless otherwise instructed, please submit your answers to the following exercises and problems to your instructor in a word processing document. Roger Company files can be downloaded from the Course-Wide Content on the Student Edition of your text's Online Learning Center.) Chapter 7 Tutorial Exercises: 1-7 There are seven exercises (3 within the chapter and 4 at the end) in Chapter 7 tutorial from the ACL in Practice file (ACL_in_Practice.pdf), in the folder where ACL manuals are saved on your hard drive (e.g., C:\\ACLManualsV9). Your instructor will inform you which, if any, of the exercises to complete and submit. Messier/Glover/Prawitt End-of-Chapter 7, ACL Problems As introduced above in the ACL problems for Chapter 3, Roger Company is a mid-size company located in the Midwest that handles the distribution of various home and garden products. You are part of the engagement team assigned to audit the financial statements of Roger Company. Roger Company has been a client of your firm for many years, and your firm has rarely encountered any problems with them. However, the engagement partner has made it very clear to you that there is no room for mistakes. Your tasks as one of the auditors on the engagement are outlined below and in other problems of the remaining chapters. Please download the Roger Company ACL files, if you haven't already. They are found in the ACL Content folder under Course-Wide Content on the Student Edition of your text's Online Learning Center. See instructions for opening the Roger Company files in the Chapter 3 assignment above. Problem 1 Roger Company's policy is to not ship goods unless a valid purchase order has been received. However, based on information obtained during your walk through to confirm your understanding of processes and controls, you learned that occasionally a rush order is received via telephone and the goods are shipped before receiving the purchase order. Rush orders are only processed for existing customers. When rush orders are received the sales person taking the order completes a \"Rush Order\" form which is then approved by the sales department supervisor. The \"Rush Order\" form is then attached to the purchase order when it is received and the details of the two forms (i.e., product and quantity) are compared. To test the effectiveness of the controls around rush orders, you want to identify all instances where product is shipped before a purchase order is received. Using the Roger Company shipping file, determine the number of invoices related to orders that were shipped before a purchase order was received. Problem 2 In discussions with the order fulfillment and shipping departments, you learn that it is common for a partial or \"split\" shipment to go out because of an insufficient quantity of items in stock to fulfill the customer order. However, controls should prohibit shipping a higher quantity than was ordered. Using information from Roger Company's Shipping file, determine how many records contain fields where the quantity shipped exceeds the quantity ordered. Chapter 8 ACL Problems Return to Menu There is limited technical assistance available for the educational version of ACL, please contact technical support: 604-669-4225; info@acl.com; http://www.acl.com/supportcenter/ (Note: Unless otherwise instructed, please submit your answers to the following problems to your instructor in a word processing document.) Messier/Glover/Prawitt End-of-Chapter 8, ACL Problems As introduced above in the ACL problems for Chapter 3, Roger Company is a mid-size company located in the Midwest that handles the distribution of various home and garden products. You are part of the engagement team assigned to audit the financial statements of Roger Company. Roger Company has been a client of your firm for many years, and your firm has rarely encountered any problems with them. However, the engagement partner has made it very clear to you that there is no room for mistakes. Your tasks as one of the auditors on the engagement are outlined below and in other problems of the remaining Chapters. Please download the Roger Company ACL files, if you haven't already. They are found in the ACL Content folder under Course-Wide Content on the Student Edition of your text's Online Learning Center. See instructions for opening the Roger Company files in the Chapter 3 assignment above. Problem 1 Use ACL to determine the sample size an auditor should use for attributes sampling given the criteria listed below: 1. With any ACL project (e.g., Roger Company) open, choose Sampling on the menu toolbar 2. Click on Calculate Sample Size 3. Choose the Record option Confidence is 95 Population is 1000 Upper Error Limit (%) is 8 (this is tolerable error) Expected Error Rate (%) is 3 4. Click Calculate 5. What is the recommended sample size? Problem 2 How would the sample size change if all sample-size inputs listed in Problem 1 stayed the same with the exceptions listed below? Please evaluate each item independently by resetting the inputs to those listed in Problem 1 and changing only the one factor listed in each item below. (Hint: If you use the Calculate button rather than the OK button the sample size window will stay open). a. Confidence dropped to 90 percent? b. Population increased to 500,000? c. Expected Error Rate (%) increased to 4? d. Upper Error Limit (%) decreases to 7? e. Upper Error Limit (%) increases to 15? Problem 3 Using your results from Problem 2 above: a. Which of the following four input factorsconfidence, population, upper error limit, or expected error ratehas the smallest effect on the sample size? b. Which two factors appear to have the greatest effect on sample size? c. Go into ACL's sampling size tool and input the factors listed in Problem 1 and then experiment with increasingly larger expected error rates. What happens as the expected error rate is nearly as large as the upper error limit or tolerable error? Why does this happen? Problem 4 For the following three control attributes, you want to be 90 percent confident that the population deviation rate does not exceed 7.5 percent. Attribute 1-The purchase order was approved (purchasing department stamp provides evidence) Attribute 2-The purchase order, receiving report, and vendor invoice are included in each voucher packet Attribute 3-The accounts payable department compared product and quantities across the three documents (initials by an accounts payable clerk and auditor reperformance provide evidence) You tested a sample of 52 voucher packages and discovered the following deviations: Attribute 1: 2 deviations Attribute 2: 1 deviation Attribute 3: 0 deviations With any ACL project open (e.g., Roger Company) evaluate the results of your testing by: 1. Select Sampling >> Evaluate Error 2. Make sure Record is the selected sample type 3. Enter the applicable parameters (e.g., Confidence is 90 and Sample Size is 52, Number of Errors or deviations listed above) 4. Click OK What is the upper error limit frequency for each attribute? Based on the results of your controls testing, which controls are considered effective? Please explain why or why not? Problem 5 Use ACL to complete problems 8-27 and 8-28 in your book. In ACL, \"upper error limit\" is the same as \"tolerable deviation rate\" and \"expected error rate\" is the same as \"expected population deviation rate.\" For problem 8-27, does the population amount you enter change the results? For 8-28, use the sample sizes computed by ACL in 8-27. ACL's sample sizes and upper error limit frequency will differ from those computed using the tables in the textbook. Did the differences lead to different conclusions or auditor decisions? Chapter 9 ACL Problems Return to Menu There is limited technical assistance available for the educational version of ACL, please contact technical support: 604-669-4225; info@acl.com; http://www.acl.com/supportcenter/ (Note: Unless otherwise instructed, please submit your answers to the following problems to your instructor in a word processing document.) Messier/Glover/Prawitt End-of-Chapter 9, ACL Problems As introduced above in the ACL problems for Chapter 3, Roger Company is a mid-size company located in the Midwest that handles the distribution of various home and garden products. You are part of the engagement team assigned to audit the financial statements of Roger Company. Roger Company has been a client of your firm for many years, and your firm has rarely encountered any problems with them. However, the engagement partner has made it very clear to you that there is no room for mistakes. Your tasks as one of the auditors on the engagement are outlined below and in other problems of the remaining chapters. Please download the Roger Company ACL files, if you haven't already. They are found in the ACL Content folder under Course-Wide Content on the Student Edition of your text's Online Learning Center. See instructions for opening the Roger Company files in the Chapter 3 assignment above. Problem 1 In addition to determining sample size, ACL can also select a random sample for you. Draw a sample of Accounts Receivable (AR) transactions from the Roger Company AR table assuming the confidence is 95, the upper error limit is 9 percent, and the expected error rate is 5 percent. 1. Open the Roger Company AR table 2. Select Sampling >> Sample Records and the Sample window appears 3. Make sure Record is the chosen Sample Type 4. Under Sample Parameters, click on the Random option 5. Click on the Size button so the Size Dialogue box opens 6. Enter the parameters as specified above (Note: The Population field should automatically have a value in it.) 7. Click on Calculate, click on OK 8. In the To field, type \"Roger AR Sample\" 9. Click OK 10. How many records are in the new Roger Company AR Sample table? Problem 2 Assuming that the electronic data were difficult to obtain and that the client compiled the electronic data only for the sample you selected in Problem 1, evaluate the effectiveness of the control that the invoice date should always precede the due date. 1. Create a filter in the Roger AR Sample table for the control described above 2. How many exceptions are there to the control above? 3. Select Sampling from the menu toolbar and click on Evaluate Error 4. Make sure Record is the selected sample type 5. Enter the appropriate parameters (i.e., Confidence 95, Sample Size 175, and the number of exceptions you observed) 6. Click OK 7. What is the upper error limit frequency? Based on the results from the operations you completed above, can the control be considered effective? Why or why not? Problem 3 Determine an appropriate sample size to test the Roger Company AR table using monetary unit sampling using the following inputs: 1. Open the Roger Company AR table 2. Sum the Amount field 3. Select Sampling >> Calculate Sample Size and the Size window appears 4. Make sure Monetary is the chosen on the Main tab 5. Input the following: Confidence is 92 percent Population is the sum of the Amount field Materiality is 10000 Expected Total Errors is 1500 6. Click on Calculate 7. What is the appropriate sample size? Problem 4 Create a Roger Company MUS Sample table (or file) by selecting Sample >> Sample Records. Make sure MUS is the chosen sample type and Fixed Interval is the chosen option under Sample Parameters. Enter the appropriate Interval value from the results in Problem 3 (find interval under the calculated sample size), and chose 350 as the Start. Ignore the Cutoff field. Save the table as \"Roger Company MUS Sample.\" How many records are in the sample table? Why is the sample size different from what was calculated in Problem 3? Problem 5 Use ACL to complete questions b and c of problem 9-21 in your textbook. For problem \"b\" Use the Sampling >> Calculate Sample Size command. Take note of the interval in the results to use for problem c. For problem \"c\" use the Sampling >> Evaluate Error command. Input the data from problem \"b\" for confidence and the interval from the ACL results when you completed problem \"b.\" Enter book value and error amounts in the \"Errors\" box for each misstatement discovered. Follow the notation \"Item amount, Error\" where \"Item amount\" is the book value and \"Error\" is the error amount or audit difference observed. Chapter 10 ACL Problems Return to Menu There is limited technical assistance available for the educational version of ACL, please contact technical support: 604-669-4225; info@acl.com; http://www.acl.com/supportcenter/ (Note: Unless otherwise instructed, please submit your answers to the following problems to your instructor in a word processing document.) Messier/Glover/Prawitt End-of-Chapter 10, ACL Problems As introduced above in the ACL problems for Chapter 3, Roger Company is a mid-size company located in the Midwest that handles the distribution of various home and garden products. You are part of the engagement team assigned to audit the financial statements of Roger Company. Roger Company has been a client of your firm for many years, and your firm has rarely encountered any problems with them. However, the engagement partner has made it very clear to you that there is no room for mistakes. Your tasks as one of the auditors on the engagement are outlined below and in other problems of the remaining chapters. Please download the Roger Company ACL files, if you haven't already. They are found in the ACL Content folder under Course-Wide Content on the Student Edition of your text's Online Learning Center. See instructions for opening the Roger Company files in the Chapter 3 assignment above. Problem 1 Possible misstatements due to lack of appropriate sales authorization include selling goods at unauthorized prices, selling amounts that exceed customer credit limits, and/or selling to customers who are bad credit risks. Roger Company's policy does permit sales in excess of credit limits, but only with management approval. a. Use the Roger Company's AR table to determine how many sales were made that exceeded customer credit limits. b. Determine how many of the sales in part "a" (where the credit limit was surpassed) were not approved. Problem 2 Possible misstatements that may occur during the cash receipts process result from cash receipts being received, but not recorded (which could facilitate embezzlement). A control technique that is used to mitigate the risk of such misstatements is to segregate the duties of the accounts receivable department, general ledger accounting records, and cash receipts. The employee who completed each duty is required to sign his/her initials, and evidence of this has been provided for you in the AR table. In each transaction, proper segregation of duties is accomplished when no two duties have been completed by the same person. Use ACL and the information from Roger Company AR table to determine in which transactions segregation of duties was not properly implemented