Question: The Broughton Cap Company requires that prenumbered receiving re

The Broughton Cap Company requires that prenumbered receiving reports be completed when purchased inventory items arrive in the receiving department. At the time of receipt, the receiving clerk writes the date of receipt on the receiving document. The last receipt in the fiscal year ended June 30, 2011 was recorded on receiving report 7279. The accounts payable department prepares prenumbered voucher packages as receiving reports are received from the receiving department. Entries in the acquisitions journal are prepared using information contained in the voucher package. For late June 2011 and early July 2011, receipts of goods are included in voucher packages as follows:
Receiving Report No. Voucher No.
7276 ............ 2532
7277 ............ 2526
7278 ............ 2527
7279 ............ 2530
7280 ............ 2531
7281 ............ 2528
7282 ............ 2529
The June 2011 and July 2011 acquisitions journals included the following information:

a. Which voucher packages, if any, are recorded in the wrong accounting period? Prepare an adjusting entry to correct the financial statements for the year ended June 30, 2011. Assume Broughton uses a perpetual inventory system and all purchases are inventory items.
b. Assume the receiving clerk accidentally wrote June 30 on receiving reports 7280 through 7282. Explain how that will affect the correctness of the financial statements.
How will you, as an auditor, discover that error?
c. Describe, in general terms, the audit procedures you would follow in making sure that cutoff for purchases is accurate at the balance sheet date.
d. Identify internal controls that will reduce the likelihood of cutoff misstatements related topurchases.
View Solution:

Sale on SolutionInn
  • CreatedOctober 10, 2012
  • Files Included
Post your question