Question 2 (20 marks) Leo is an audit senior of Francis CPA and is assigned to audit the sales and collection cycle of a client, B&C. During the year under audit, some senior or experienced accounting staff of B&C left the company and were replaced by new recruits. Leo's audit manager, Leon, is worried about whether proper internal controls were effective during the year. In particular, Leon asks Leo to ascertain the effectiveness of the following client's procedures. (1) Does the controller approve the credit memorandum for goods returned by customers? (2) Does the mailing room prepare a prelisting of cheques received on a daily basis? (3) Does the assistant accountant keep cheques received from customers in a safe after banking hours? (4) Does the accountant verify the bank reconciliation prepared by the accounts clerk? 2 Required: For each of the above procedures, (i) identify the transaction-related audit objectives, (ii) explain the potential financial misstatements if the procedure is not satisfactorily performed, and (ii) discuss an audit test to detect the possible misstatement (20 marks) -End- Question 2 (20 marks) Leo is an audit senior of Francis CPA and is assigned to audit the sales and collection cycle of a client, B&C. During the year under audit, some senior or experienced accounting staff of B&C left the company and were replaced by new recruits. Leo's audit manager, Leon, is worried about whether proper internal controls were effective during the year. In particular, Leon asks Leo to ascertain the effectiveness of the following client's procedures. (1) Does the controller approve the credit memorandum for goods returned by customers? (2) Does the mailing room prepare a prelisting of cheques received on a daily basis? (3) Does the assistant accountant keep cheques received from customers in a safe after banking hours? (4) Does the accountant verify the bank reconciliation prepared by the accounts clerk? 2 Required: For each of the above procedures, (i) identify the transaction-related audit objectives, (ii) explain the potential financial misstatements if the procedure is not satisfactorily performed, and (ii) discuss an audit test to detect the possible misstatement (20 marks) -End