Question 2 (27 marks) The following are misstatements that have occurred at Pak and Save Foods Ltd., a retail and wholesale grocery company. 1 On the last day of the year, a truckload of beef was set aside for shipment but was not shipped. Since it was still on hand it was included as inventory. The shipping document was dated the last day of the year so it was also included as a current year sale. 2 The incorrect price was used on sales invoices for billing shipments to customers because the wrong price was entered into the computer master file of prices. 3 A supplier invoice was paid even though no merchandise was ever received. The accounts payable software application does not require the input of a valid receiving report number before payment can be made. 4 Employees in the receiving department took some beef home for their personal use. When a shipment of meat was received, the receiving department filled out a receiving report and forwarded it to the accounting department for the amount of goods actually received. At that time, the beef were put in an employee's pickup truck rather than in the storage freezer. 5 An accounts payable clerk processed payments to himself by adding a fictitious supplier address to the approved supplier master file. 6 During the physical count of inventory of the retail store, one count person wrote down the wrong description of several products and miscounted the quantity. 7 A salesperson sold an entire carload of lamb at a price below cost because she did not know the cost of the lamb had increased in the past week. 8 A supplier's invoice was paid twice for the same shipment. The second payment arose because the supplier sent a duplicate copy of the original two weeks after the payment was due. Required: a For each misstatement, identify the management assertion that has not been met (8 marks) b For each misstatement, suggest an internal control to correct the deficiency. (19 marks) Question 2 (27 marks) The following are misstatements that have occurred at Pak and Save Foods Ltd., a retail and wholesale grocery company. 1 On the last day of the year, a truckload of beef was set aside for shipment but was not shipped. Since it was still on hand it was included as inventory. The shipping document was dated the last day of the year so it was also included as a current year sale. 2 The incorrect price was used on sales invoices for billing shipments to customers because the wrong price was entered into the computer master file of prices. 3 A supplier invoice was paid even though no merchandise was ever received. The accounts payable software application does not require the input of a valid receiving report number before payment can be made. 4 Employees in the receiving department took some beef home for their personal use. When a shipment of meat was received, the receiving department filled out a receiving report and forwarded it to the accounting department for the amount of goods actually received. At that time, the beef were put in an employee's pickup truck rather than in the storage freezer. 5 An accounts payable clerk processed payments to himself by adding a fictitious supplier address to the approved supplier master file. 6 During the physical count of inventory of the retail store, one count person wrote down the wrong description of several products and miscounted the quantity. 7 A salesperson sold an entire carload of lamb at a price below cost because she did not know the cost of the lamb had increased in the past week. 8 A supplier's invoice was paid twice for the same shipment. The second payment arose because the supplier sent a duplicate copy of the original two weeks after the payment was due. Required: a For each misstatement, identify the management assertion that has not been met (8 marks) b For each misstatement, suggest an internal control to correct the deficiency. (19 marks)
