Medco Hospital Buyers Group (MHBG) processes a significant number of intercompany transactions each month, mainly transferring cash
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Company policy calls for intercompany accounts to be reconciled each month and for the balances between business units to be confirmed, however, the policy is not followed. The reconciliations are not performed regularly, and when they are performed it is not in a timely manner.
Management reviews the financial reports of the various business units and follows up on any large amounts in the intercompany accounts. Management also reviews operating expenses of each of the business units each month, using variances as an indicator of reasonableness. Management consistently investigates any large intercompany account balances and unusual or large variances that are identified in this monthly review.
(Adapted from AS 2, D1, Scenario A)
Do you believe the lack of monthly intercompany account reconciliation and confirmation at MHBG is an ICFR deficiency? If you think it is, is a significant deficiency or a material weakness and why?
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
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Related Book For
Auditing and Assurance Services Understanding the Integrated Audit
ISBN: 978-0471726340
1st edition
Authors: Karen L. Hooks
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