Niosoki Auto Parts sells new parts for foreign automobiles to auto dealers. Company policy requires that a
Question:
For late August and early September, shipping documents are billed on sales invoices as follows:
Shipping Document No Sales Invoice No
2163 .................... 5437
2164 .................... 5431
2165 .................... 5432
2166 .................... 5435
2167 .................... 5436
2168 .................... 5433
2169 .................... 5434
2170 .................... 5438
2171 .................... 5440
2172 .................... 5439
The August and September sales journals have the following information included:
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Required
a. What are the accounting requirements for a correct sales cutoff?
b. Which sales invoices, if any, are recorded in the wrong accounting period? Prepare an adjusting entry to correct the financial statement for the year ended August 31, 2011. Assume that the company uses a periodic inventory system (inventory and cost of sales do not need to be adjusted).
c. Assume that the shipping clerk accidentally wrote August 31 on shipping documents 2168 through 2172. Explain how that will affect the correctness of the financial statements. How will you, as an auditor, discover that error?
d. Describe, in general terms, the audit procedures you would follow in making sure that cutoff for sales is accurate at the balance sheet date.
e. Identify internal controls that will reduce the likelihood of cutoff misstatements. How would you test eachcontrol?
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
a A shipment should be recorded as a sale on the date of shipment or the passing of title whichever occurs first Ordinarily a shipment is considered a ...View the full answer
Auditing and Assurance services an integrated approach
ISBN: 978-0132575959
14th Edition
Authors: Alvin a. arens, Randal j. elder, Mark s. Beasley
