REQUIRED: IDENTIFY THE ACCOUNTS AND ASSERTION[S] FOR EACH CONDITION

TWO ACCOUNTS ARE AFFECTED BY EACH CONDITONS. IDENTIFY THEM.

c. Blinder Co. repeatedly overcharges its customers for shipping (in many cases shipping is free). The company is very slow to credit customer accounts for the overcharges.

d. Management has arranged to have recorded as property, plant & equipment purchases that should have been recorded as inventory. Management has been placing great emphasis on the achievement of earnings projections.

e. Credco is a financial services company. Recently, it transferred its receivables to a third party in exchange for cash. Credco recorded the transfer as a sale of the receivables. The auditors are concerned that the transfer may actually be a secured borrowing.

f. Meliora Corps cost accounting system is too slow to update work-in-process inventory for changes in labor and other production costs.

g. Pellmell Inc did not describe its lease obligatons in the footnotes to its financial statements.

h. Jolly Co.s inventory manager has figured out a way to ship goods to an accomplice without any sales order documents that authorize such shipments, and without creating any records. He has stolen more than $30,000 in inventory this way.

i. Fluffam Corp. charged interest costs on a purchase loan for new equipment to Plant & Equipment.

REQUIRED: IDENTIFY THE ACCOUNTS AND ASSERTION[S] FOR EACH CONDITION

ASSERTION[S]

E= existence C=Completeness A=Accuracy Cl=Classification Cu=Cutoff V=Valuation RO=Rights & Obligations PD=Presentation & Disclosure

l. Test extend unit prices times quantity on the inventory list, test foot the list, and compare the total to the general ledger.

2. Compare selected items on the inventory list with the physical inventory.

3. Question operating personnel about the possibility of obsolete or slow-moving inventory.

4. Select a sample of inventory items in the factory warehouse and trace each item to the inventory count sheets to determine if each selected item has been included and if the quantity and description are correct.

5. Examine sales invoices and contracts with customers to determine whether any goods are out on consignment with customers.

6. Send letters directly to third parties who hold the client's inventory and request that they, respond directly to the auditors.

7. Compare invoices to customers with shipping documents for the invoiced goods.

8. Compare shipping documents with associated sales orders

9. Match inventory receiving reports to purchase orders.