Question

You are auditing Martha’s Prison Clothes Inc., as of December 31,
2014. The inventory for orange jumpsuits shows 1,263 suits at $ 782 for a total of $ 987,666. When you look at the invoices for the jumpsuits, you see the following:


Required: a. Determine the adjusting entry, if any, for the cost of inventory at December 31, 2014. b. Would your answer to part (a) be different if you saw an invoice dated January 9, 2015, for 500 suits at $ 750? Instructions for Problems 9.57, 9.58 and 9.59
The cases in Problems 9.57, 9.58, and 9.59 are similar to the one in the chapter. They give the problem and the amount. Your assignment is to write the audit approach portion of the case organized around these sections: Objective. Express the objective in terms of the facts supposedly asserted in the financial records, accounts, and statements.
Control. Write a brief explanation of desirable controls, missing controls, and especially the types of deviations that might arise from the situation described in the case.
Tests of controls. Write some procedures for obtaining evidence about controls, especially procedures that could discover control deviations. If there are no controls to test, there are no procedures to perform; go to the next section. A procedure should instruct someone about the source(s) of evidence to tap and the work to do.
Audit of balance. Write some procedures for obtaining evidence about the balance assertions of existence, rights and obligations, completeness, valuation, and accuracy identified in your objective section.
Discovery summary. Write a short statement about the discovery you expect to accomplish with your procedures. Inventory and deferred cost overstatement. Follow the preceding instructions. Write the audit approach section following the cases in thechapter.


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  • CreatedOctober 27, 2014
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