WRITTEN QUESTIONS To gain an understanding of the client's present accounting systems, the firm of Abernethy and Chapman has a policy that all S) stems must be recorded in a memo (i e , narrative) format and a flowcharting format By using both, staff members are able to achieve a more effective and a more efficient understanding of the design of each system Based on Exhibit 4 3 (a memo explanation of the Revenue Recognition section of the Revenue and Cash Receipts cycle), prepare a flowchart to provide a graphic display of this system Use the flowchart symbols that appear in Exhibit 4 2 Analyze Exhibit 4 4, a flowchart representation of the Cash Receipts procedures, and prepare a written memorandum to accompany and explain this particular system At the firm of Abernethy and Chapman, after the memo and flowchart have been prepared, a preliminary analysis is made of the internal control policies and procedures found in the system The auditor is searching for weaknesses within the structure of the system as well as any particularly strong features that would reduce control risk To assist the auditor in evaluating a system, Abernethy and Chapman utilizes the form presented in Exhibit 4 5 Complete this document based on the flowchart in Exhibit 4 4 representing the Cash Receipts section of the Revenue and Cash Receipts cycle Be especially careful to note any internal control weaknesses or strengths that may be indicated (DISK CASE4 DOC) Rogers has stated that he wants the auditing firm to help improve Lakeside's accounting systems Exhibit 4 3 identifies the revenue recognition procedures currently used in connection with distributorship sales List improvements that could be made in this system LIBRARY ASSIGNMENT Read the following as well as any other published information concerning the audit consideration to be given to a client's internal control structure Consideration of the Internal Control Structure in a Financial Statement Audit, Statement on Auditing Standards 55, issued by the Auditing Standards Board of the American Institute of Certified Public Accountants, April, 1988 SAS No 55 The Auditor's New Responsibility for Internal Control, Journal of Accountancy May, 1988, p 86 1 Applying SAS No 55 in Audits of Small Businesses, Journal of Accountancy November, 1988, p 40 A Critique of SAS No 55, Accounting Horizons, March, 1991, p 1 Assume that an auditing firm has assessed the control risk of a new client to be below the maximum Write a report describing the factors that could have led to this judgment Indicate, also, the various effects that this evaluation could have on the audit testing process Exhibit 4 1 Lakeside Company ORGANIZATION CHART In Effect December 31, 1993 Assistant C A Land Assistant bShort Assistant S Wlsdon Warehouse Crew Maintenance Staff I Vice President Treasurer Controller Vice President Sales Brendan Davis Mark Hayes Inventory Carol Howell Edward Thomas I I 1 Assistant I JanLuck I Man ager Represent Accountant Store 1 District A S A Sweet Manager Represent Store 2 District B Manager Represent i District C Store 3 Manager Represent Store 4 District D Manager Represent Store 5 District E Manager Represent Store6 District F

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Jul 29, 2024

WRITTEN QUESTIONS To gain an understanding of the client's present accounting systems, the firm of Abernethy and Chapman has a policy that all S)!stems must

WRITTEN QUESTIONS

To gain an understanding of the client's present accounting systems, the firm of Abernethy and Chapman has a policy that all S)!stems must be recorded in a memo (i.e., narrative) format and a flowcharting format. By using both, staff members are able to achieve a more effective and a more efficient understanding of the design of each system.

Based on Exhibit 4-3 (a memo explanation of the Revenue Recognition section of the Revenue and Cash Receipts cycle), prepare a flowchart to provide a graphic display of this system. Use the flowchart symbols that appear in Exhibit 4-2.

Analyze Exhibit 4-4, a flowchart representation of the Cash Receipts procedures, and prepare a written memorandum to accompany and explain this particular system.

At the firm of Abernethy and Chapman, after the memo and flowchart have been prepared, a preliminary analysis is made of the internal control policies and procedures found in the system. The auditor is searching for weaknesses within the structure of the system as well as any particularly strong features that would reduce control risk. To assist the auditor in evaluating a system, Abernethy and Chapman utilizes the form presented in Exhibit 4-5. Complete this document based on the flowchart in Exhibit 4-4 representing the Cash Receipts section of the Revenue and Cash Receipts cycle. Be especially careful to note any internal control weaknesses or strengths that may be indicated. (DISK: CASE4.DOC)

Rogers has stated that he wants the auditing firm to help improve Lakeside's accounting systems. Exhibit 4-3 identifies the revenue recognition procedures. currently used in connection with distributorship sales. List improvements that could be made in this system.

LIBRARY ASSIGNMENT

Read the following as well as any other published information concerning the audit consideration to be given to a client's internal control structure:

"Consideration of the Internal Control Structure in a Financial Statement Audit," Statement on Auditing.Standards 55, issued by the.. Auditing Standards Board of the American Institute of Certified Public Accountants, April, 1988.

"SAS No. 55: The Auditor's New Responsibility for Internal Control," Journal of Accountancy. May, 1988, p. 86.

...

"Applying SAS No. 55 in Audits of Small Businesses," Journal of Accountancy.

November, 1988, p. 40.

"A Critique of SAS No. 55," Accounting Horizons, March, 1991, p. 1.

Assume that an auditing firm has assessed the control risk of a new client to be below the maximum. Write a report describing the factors that could have led to this judgment. Indicate, also, the various effects that this evaluation could have on the audit testing process.

Exhibit 4-1

Lakeside Company.

ORGANIZATION CHART

In Effect December 31, 1993