Q 1

ABC Company is a major wholesaler of toilets and related actories. The company openent a large store in a growing metropolitan

beginning of the company's fiscal year. The following facts surfaced during an internal audit of the sture shortly after the end of the fam

a the manager of the new store had booked a large year end adjustment-deot to sales and a credt be account re The journal entry explanation indicated that the entry was made to adjust the general ledger accounts receable and in the accur

recevabile subsidiary edger

b. The year end gross marge percentage at the new store was significantly Uwer than the average prossimargin perge of the company's other stores The manager of the new store was stealing payments customers made on account that is why the general ledger we with the subsidiary ledger. The store manager made the large ywe end ajuting entry to cover up the the which is why the dire

gross margin percentage was lower than the age of the other stores d. The year end adjustment was material to the store, but not to the company as a whole

Consider the facts presented above. Using the observations and escalation process determine the following for the noted observation

1. What COSO objective categories are affected?

2. Classify the observations as controls that are inadequately designed, ineffectively operating, or both.

3. Determine what you believe the impact and likelihood of the observations will be 4. Assess whether the observations are insignificant, significant, or material and indicate what your frame of reference will be

5. Based on your above answers, how and to whom would you communicate the observations