Companies can gain efficiencies by implementing effective monitoring of their internal control processes

5-42 (Monitoring Activities) Companies can gain efficiencies by implementing effective monitoring of their internal control processes.

Required:
a. Explain the importance of monitoring and provide examples of monitoring.
b. Identify the important monitoring procedures that a company might use in assessing its controls over revenue recognition and costs that might be utilized in each of the following situations:
• A convenience store such as a 7-Eleven
• A chain restaurant such as Olive Garden
• A manufacturing division making rubberized containers for the consumer market
c. Can the auditor focus the assessment of internal control on testing the effectiveness of the company’s monitoring? Discuss and support your conclusion. Discuss, for example, the level of comfort the auditor can get about the effectiveness of other controls by testing the effectiveness of monitoring controls.


Click here for the solution: Companies can gain efficiencies by implementing effective monitoring of their internal control processes

List two examples of audit evidence the auditor can use in support of each of the following

Auditing P 7-31

List two examples of audit evidence the auditor can use in support of each of the following:
a. Recorded amount of entries in the acquisitions journal
b. Physical existence of inventory
c. Accuracy of accounts receivable
d. Ownership of fixed assets
e. Liability for accounts payable
f. Obsolescence of inventory
g. Existence of petty cash


Click here for the solution: List two examples of audit evidence the auditor can use in support of each of the following

A machine was purchased two years ago for $120,000 and can be sold for $50,000 today

A machine was purchased two years ago for $120,000 and can be sold for $50,000 today. The machine has been depreciated using the MACRS 5-year recovery period and the firm pays 40 percent taxes on both ordinary income and capital gains. Find the firm's tax liability (benefit), if any.


Click here for the solution: A machine was purchased two years ago for $120,000 and can be sold for $50,000 today

Jill Loomis believes a current liability is a debt that can be expected to be paid in one year

1. Jill Loomis believes a current liability is a debt that can be expected to be paid in one year. Is Jill correct? Explain.

2. Frederickson Company obtains $40,000 in cash by signing a 9%, 6-month, $40,000 note payable to First Bank on July 1. Frederickson’s fiscal year ends on September 30. What
information should be reported for the note payable in the annual financial statements?


Click here for the solution: Jill Loomis believes a current liability is a debt that can be expected to be paid in one year

The One Product economy, which produces and sells only personal computers (PCs), expects that it can sell 500 more, or 12,500 PCs, next year

11. The One Product economy, which produces and sells only personal computers (PCs), expects that it can sell 500 more, or 12,500 PCs, next year. Nominal GDP was $20 million this year, and the money supply was $7 million. The central bank for the One Product economy plans to increase the money supply by 10 percent next year.

a. What was the average selling price for the personal computers this year?
b. What is the expected average selling price next year for personal computers if the velocity of money remains at this year’s turnover rate? What percentage change in price level is expected to occur?
c. If the objective is to keep the price level the same next year (i.e., no inflation), what percentage increase in the money supply should the central bank plan for?
d. How would your answer in (c) change if the velocity of money is expected to be three times next year? What is it now?

Click here for the solution: The One Product economy, which produces and sells only personal computers (PCs), expects that it can sell 500 more, or 12,500 PCs, next year