12-46 Overview and Objectives of Audit Procedure
The following represents a critical review of the documentation of a new auditor for the cash and marketable securities audit areas. Several deficiencies are noted; they resulted in significant errors not being initially identified.
Required
For each item listed as follows:
a. Identify the audit procedure that would have detected the error.
b. Identify the basic financial assertion tested by the audit procedure.
Documentation Deficiencies and Financial Statement Misstatements
1. The client was in violation of important loan covenant agreements.
2. The client was engaged in a sophisticated kiting scheme involving transfers through five geographically disbursed branch offices.
3. The December cash register was held open until January 8.All receipts through that date were recorded as December sales and cash receipts. The receipts, however, were deposited daily.
4. Cash disbursements for December were written, but the checks were not mailed until January 10 because of a severe cash flow problem.
5. The client’s bank reconciliation included an incorrect amount as balance per the bank.
6. Approximately 25 percent of the cash receipts for December 26 and December 28 were recorded twice.
7. The client’s bank reconciliation covered up a clever fraud by the controller by incorrectly footing the outstanding checks and including fictitious checks as outstanding.
Click here for the solution: The following represents a critical review of the documentation of a new auditor for the cash and marketable securities audit areas
Showing posts with label marketable. Show all posts
Showing posts with label marketable. Show all posts
Sunday, September 13, 2015
The following represents a critical review of the documentation of a new auditor for the cash and marketable securities audit areas
12-46 (Overview and Objectives of Audit Procedures) The following represents a critical review of the documentation of a new auditor for the cash and marketable securities audit areas. Several deficiencies are noted; they resulted in significant errors not being initially identified.
Required
For each item listed as follows:
a. Identify the audit procedure that would have detected the error.
b. Identify the basic financial assertion tested by the audit procedure.
Documentation Deficiencies and Financial Statement Misstatements
1. The client was in violation of important loan covenant agreements.
2. The client was engaged in a sophisticated kiting scheme involving transfers through five geographically disbursed branch offices.
3. The December cash register was held open until January 8.All receipts through that date were recorded as December sales and cash receipts.The receipts, however, were deposited daily.
4. Cash disbursements for December were written, but the checks were not mailed until January 10 because of a severe cash flow problem.
5. The client’s bank reconciliation included an incorrect amount as balance per the bank.
6. Approximately 25 percent of the cash receipts for December 26 and December 28 were recorded twice.
7. The client’s bank reconciliation covered up a clever fraud by the controller by incorrectly footing the outstanding checks and including fictitious checks as outstanding.
Click here for the solution: The following represents a critical review of the documentation of a new auditor for the cash and marketable securities audit areas
Required
For each item listed as follows:
a. Identify the audit procedure that would have detected the error.
b. Identify the basic financial assertion tested by the audit procedure.
Documentation Deficiencies and Financial Statement Misstatements
1. The client was in violation of important loan covenant agreements.
2. The client was engaged in a sophisticated kiting scheme involving transfers through five geographically disbursed branch offices.
3. The December cash register was held open until January 8.All receipts through that date were recorded as December sales and cash receipts.The receipts, however, were deposited daily.
4. Cash disbursements for December were written, but the checks were not mailed until January 10 because of a severe cash flow problem.
5. The client’s bank reconciliation included an incorrect amount as balance per the bank.
6. Approximately 25 percent of the cash receipts for December 26 and December 28 were recorded twice.
7. The client’s bank reconciliation covered up a clever fraud by the controller by incorrectly footing the outstanding checks and including fictitious checks as outstanding.
Click here for the solution: The following represents a critical review of the documentation of a new auditor for the cash and marketable securities audit areas
Saturday, August 22, 2015
Loreal-American Corporation purchased several marketable securities during 2011
E 12-5 Securities available-for-sale; adjusting entries
Loreal-American Corporation purchased several marketable securities during 2011. At December 31, 2011, the company had the investments in common stock listed below. None was held at the last reporting date, December 31, 2010, and all are considered securities available-for-sale.
Required:
1. Prepare appropriate adjusting entries at December 31, 2011.
2. What amounts would be reported in the income statement at December 31, 2011, as a result of these adjusting entries?
Click here for the solution: Loreal-American Corporation purchased several marketable securities during 2011
Loreal-American Corporation purchased several marketable securities during 2011. At December 31, 2011, the company had the investments in common stock listed below. None was held at the last reporting date, December 31, 2010, and all are considered securities available-for-sale.
Required:
1. Prepare appropriate adjusting entries at December 31, 2011.
2. What amounts would be reported in the income statement at December 31, 2011, as a result of these adjusting entries?
Click here for the solution: Loreal-American Corporation purchased several marketable securities during 2011
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