Philly Communications is the largest provider of telephone and cable service in Pennsylvania. During its yearend audit, the manager at Dell & Wayne, Philly’s independent audit firm determined that the appropriate amount for materiality at the financial statement level to be used during planning for the current year’s audit is $1,000,000.Derek, a staff auditor at Dell & Wayne, is assigned the task of performing substantive tests on Philly’s asset accounts. The following table summarizes Derek’s findings. All the misstatements are overstatements.

1. When viewed independently of one another, do any of the actual misstatements in the individual asset accounts indicate a material misstatement that calls for an adjusting journal entry in Philly Communications’ books?
2. Should Derek recommend adjusting journal entries to Philly’s management? If so, what journal entry might Derek propose?
3. How does the concept of aggregate misstatement affect youranswer?

  • CreatedJanuary 21, 2015
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