Answer the following questions based on the information presented for Cloud 9 in the appendix to this

Question:

Answer the following questions based on the information presented for Cloud 9 in the appendix to this text and the current and earlier chapters. You should also consider your answers to the case study questions in earlier chapters. Sharon Gallagher and Josh Thomas have assessed the internal controls at Cloud 9 as being effective at an entity level. This means that, at a high level, the company demonstrates an environment where potential material misstatements are prevented or detected.


Required

You have been assigned the task of documenting the understanding of the process for recording sales, trade receivables and cash receipt transactions for wholesale customers. In your absence, Josh met with the Cloud 9 financial controller, Carla Johnson, and received permission to tape the interview, which is provided as a transcript (see the appendix to this text). Using this interview transcript and other information presented in the case, you are asked to:

(a) Prepare a flowchart, logic diagram, or narrative documenting your understanding of the sales to cash receipts process for wholesale sales.

(b) Identify any follow-up questions you would like to ask the client if aspects of the process are not adequately explained. You could address such questions to Carla Johnson or any other employee you deem appropriate.

(c) Identify the potential material misstatement that could occur in the sales to cash receipts process for wholesale sales.

(d) Identify, for the material misstatements in (c), the financial report assertion that is affected. To answer (c) and (d), draw up a worksheet using the following format. Use as many rows as you need. Use the first three columns to present your findings. (You will complete the fourth column in chapter 8.)Significant process Potential material misstatement Assertions Transaction level internal controls

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Auditing A Practical Approach

ISBN: 9780730364573

3rd Edition

Authors: Robyn Moroney, Fiona Campbell, Jane Hamilton

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