One of the mitigating controls that you wish to rely on is that any increases in...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
One of the mitigating controls that you wish to rely on is that any increases in credit limits are authorised by the financial controller. The audit assistant checks the company's policy manual and notes that this control procedure is required. He concludes that the control is operating effectively and can be relied on. B. A test of controls of 48 sales transactions was undertaken which resulted in four errors. The working papers noted that none of the errors found was material and the conclusion from conducting the test was that: 'the system is operating satisfactorily'. C. Trade payables is a material balance sheet account comprising 20 large and 200 small creditors. Your client presented the audit assistant with a list of creditors making up the balance shown in the trade payables control account in the general ledger. In your absence the audit assistant decided to utilise a judgemental sampling technique to test these creditors. The only procedure the audit assistant used was to randomly select 30 creditors from listing. These were traced to reconciled creditors' statements. D. SJO Pty Limited (SJO) is currently in dispute with the taxation authorities. This year an assessment was issued by the taxation authorities requiring the company to pay an additional $150,000 in taxes. SJO believes that the basis for the assessment was incorrect and inappropriate. Notwithstanding this, it paid the $150,000 to the taxation authorities under protest and lodged a formal objection against the assessment. SJO is carrying forward the $150,000 paid as an 'other receivable' in its year-end financial report. The audit assistant has verified this other receivable by agreeing it to the cash payments books and the bank statement. Required: You are the audit senior and have been presented with the above information by the audit assistant (a new graduate). In each of the above situations, explain why the audit assistant has not obtained sufficient appropriate audit evidence or has concluded incorrectly. One of the mitigating controls that you wish to rely on is that any increases in credit limits are authorised by the financial controller. The audit assistant checks the company's policy manual and notes that this control procedure is required. He concludes that the control is operating effectively and can be relied on. B. A test of controls of 48 sales transactions was undertaken which resulted in four errors. The working papers noted that none of the errors found was material and the conclusion from conducting the test was that: 'the system is operating satisfactorily'. C. Trade payables is a material balance sheet account comprising 20 large and 200 small creditors. Your client presented the audit assistant with a list of creditors making up the balance shown in the trade payables control account in the general ledger. In your absence the audit assistant decided to utilise a judgemental sampling technique to test these creditors. The only procedure the audit assistant used was to randomly select 30 creditors from listing. These were traced to reconciled creditors' statements. D. SJO Pty Limited (SJO) is currently in dispute with the taxation authorities. This year an assessment was issued by the taxation authorities requiring the company to pay an additional $150,000 in taxes. SJO believes that the basis for the assessment was incorrect and inappropriate. Notwithstanding this, it paid the $150,000 to the taxation authorities under protest and lodged a formal objection against the assessment. SJO is carrying forward the $150,000 paid as an 'other receivable' in its year-end financial report. The audit assistant has verified this other receivable by agreeing it to the cash payments books and the bank statement. Required: You are the audit senior and have been presented with the above information by the audit assistant (a new graduate). In each of the above situations, explain why the audit assistant has not obtained sufficient appropriate audit evidence or has concluded incorrectly.
Expert Answer:
Answer rating: 100% (QA)
A Credit Limit Control The audit assistant relies on the fact that any increases in credit limits are authorized by the financial controller as a mitigating control However the audit assistant merely ... View the full answer
Related Book For
Auditing a risk based approach to conducting a quality audit
ISBN: 978-1133939153
9th edition
Authors: Karla Johnstone, Audrey Gramling, Larry Rittenberg
Posted Date:
Students also viewed these accounting questions
-
The general ledger of Red Storm Cleaners at January 1, 2018, includes the following account balances: Accounts Debits Credits Cash $ 11,000 Accounts Receivable 6,200 Supplies 2,200 Equipment 19,000...
-
The estimated supply function for avocados is Q = 58 + 15p - 20pf, where p is the price of avocados and pf is the price of fertilizer. The price elasticity of supply, estimated at p = 4 and pf = 10,...
-
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
-
1. Find the perimeter of each figure. 2. 52 feet 40 feet 52 feet 72 feet 11 kilometers 20 kilometers 35 kilometers
-
(a) What is the amplitude of the E field? (b) What is the average power per unit area of the EM wave?
-
A long bus bar (cylindrical rod used for making electrical connections) of diameter D is installed in a large conduit having a surface temperature of 30C and in which the ambient air temperature is...
-
A \(\$ 100,000\) bond priced at 103.5 can be bought or sold for a. \(\$ 100,000+\) interest b. \(\$ 103,500\) c. \(\$ 3,500\) d. \(\$ 10,350\)
-
Florida Car Wash is considering a new project whose data are shown below. The equipment to be used has a 3-year tax life, would be depreciated on a straight-line basis over the project's 3-year life,...
-
P5-6. You are the management accountant of Cheesecake and Pan Company. You were tasked to make an internal projection for the valuation exercise of the company. Volume Revenues Cost of Goods Sold...
-
(Note: Although this question is based on the Skates 'n' Surf business the accounts, amounts and transactions involved may differ between questions. Please read each question separately.) Skate n...
-
Insurance companies use generally accepted accounting principles (GAAP) and statutory accounting principles, and they prepare different financial statements for each accounting basis. From the...
-
Atmospheric pressure in Phoenix is measured to be approximately748 mm Hg. Convert that pressure value to atm. Expressyour answer with the appropriate significant figures and unit.
-
A cylindrical vessel with a diameter of 8 inches and 5feet long contained acetylene at 300 psi gauge and 82F. After someamount of acetylene was used, the pressure was reduced to 190 psigauge and the...
-
Use the algebraic method to find the point of intersection for the lines 2x - y = -3 and 2x-3y=-13.
-
AL Rashidya Company s auditor received, directly from the bank, confirmations and cutoff statements with related cheques and deposit tickets for Al Rashidya s three general purpose bank accounts. The...
-
What ethical considerations should be taken into account when leveraging consumer data for targeted advertising campaigns?
-
ABC Company has two divisions: the Cologne Division and the Bottle Division. The Bottle Division produces containers that can be used by the Cologne Division. The Bottle Division's variable...
-
Make an argument that Williams had a right to delay the closing until after August 1.
-
Define audit quality. What are the five primary drivers of audit quality as articulated by the Financial Reporting Councils Audit Quality Framework?
-
Review Exhibit and describe how the two audit approaches presented in the Exhibit differ. What factors would lead to such a difference?
-
TRUE-FALSE QUESTIONS 1. Each of the following factors would lead the auditor to assess control risk at a higher level: the company lacks personnel or expertise to deal with changes in the industry,...
-
The output response of a first order system with excitation is: (a) \(y=x\left(1-e^{-t / \tau} ight)\) (b) \(y=x e^{-t / \tau}\) (c) \(y=x\left(1+e^{-t / \tau} ight)\) (d) \(y=x\left(1-e^{t \tau}...
-
What is an actuator? List various types of actuators.
-
What is a regulator?
Study smarter with the SolutionInn App