Fundamental Accounting Principles Volume 2 21st Edition John Wild, Ken Shaw, Barbara Chiappetta - Solutions

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Describe two tests of controls that the audit team could perform on each of the key controls identied above.
Indicate for each of the controls listed above whether it is a key control. Provide an explanation for each of your answers.
For each control mentioned above, list and explain the control objectives MC’s management is attempting to achieve.
Recommend improvements to the internal controls for the inventory count procedures.
Identify the weaknesses in the internal controls for the inventory count.
With reference to the weaknesses identied, describe the risk of material misstatement for the accuracy, valuation and allocation assertion of inventory.
Identify the internal control weaknesses evident from the information provided above.
list all possible risks that the foreign customer could face with regard to the purchase of convertors from Stallion.
list all possible risks that Stallion could face with regard to the manufacture and sale of convertors to its foreign customer
List and discuss the control objectives of Bicyclycy’s inventory and production cycle.
Discuss the purpose of the inventory and production cycle.
For each weakness identied, recommend an improvement(s) to address the identied weakness.
Identify the weaknesses in the purchases process based on the scenario above.
Describe the additional controls which must be in operation over the internet banking service at Lemon Tree in order to ensure that only valid payments are made to creditors.
Describe the additional controls which must be in place at Lemon Tree in order to ensure that only valid amendments are made to the inventory masterle.
Describe the additional logical internal controls that should be implemented in order to prevent the unauthorised use of the payroll masterle.
Recommend internal controls in order to detect weaknesses caused by process errors occurring during the updating of the payroll masterle.
List the risks arising when attention is not given to the errors that occur during the updating process of the payroll masterle.
Describe the controls that should be implemented relating to backup procedures and controls in order to prevent back-up CDs from being lost or falling into the hands of unauthorised persons.
Describe the application controls that must be present on the cloud service app in order to ensure that all pictures ordered by publishers are processed accurately and are valid and complete. You must discuss input, processing and output controls.
Explain the responsibility of the board of directors in terms of IT governance, as well as the responsibilities of the risk and audit committees.
Explain why the implementation of these principles is important for the sustainability of a listed private hospital.
Identify three high-level information security principles that the IT management system should include.
Identify what IT management of a listed company should be able to demonstrate with regard to responding to the risks arising from the information system detailed above.
List the most signicant risks that should be considered when a new system is developed.
Identify the weaknesses in the controls over changes made to the application software.
Describe the additional continuity controls that I[phone] must implement in order to sufficiently protect the company against the impact of loadshedding on the business.
Describe the additional benets to a company buying and implementing a new accounting package developed specically for the South African small- and medium-enterprise market.
Explain how ‘authorisation matrixes’ could have been used in order to ensure that only valid and authorised changes could be made to the information on the computer system, which could have prevented the thieves from removing and changing information stored on the system.
Describe the physical access controls (over and above those already mentioned in the scenario) that should have been implemented in order to prevent the break-in and to ensure that the back-ups stored in Block B of Some Nights’ premises could be used for authorised purposes only. Your answer must
The edit check in order to detect the entry of a customer number that does not exist is called a check digit a limit check a sequence check a validity check.
Controls designed to prevent, detect or correct errors in transactions as they ow through the various stages of a specic data-processing program are referred to as
Password effectiveness is enhanced by all of the following, except frequent changes user selection of passwords not displaying the password on the screen automatic disconnection after several unsuccessful attempts.
All of the following are effective control procedures in order to ensure that operators do not make unauthorised changes to programs and les except for rotating duties having multiple operators in the computer room during processing requiring formal written authorisation and documentation of any
Controls designed to ensure that an organisation’s computer-based control environment is stable and well managed are called general controls applications controls detective controls preventive controls.
Which of the following is the correct order of action to be taken when one undertakes a risk assessment, in order to implement an effective system of internal control?
Which of the following is a control procedure relating to both the design and the use of documents and records?Locking blank cheques in a drawer Reconciling the bank account Sequentially pre-numbering sales invoices Comparing actual physical quantities to recorded amounts
In order to achieve an effective segregation of duties, certain functions should be separated. Which of the following is the correct listing of accounting-related functions that should be separated?Control, recording and monitoring Authorisation, recording and custody Control, custody and
All things being equal, detective controls are superior to preventive controls corrective controls are superior to preventive controls preventive controls are equally as important as detective controls preventive controls are superior to detective controls.
Which of the following statements about the control environment is false?Management’s attitude towards internal control and ethical behaviour has little impact on employee beliefs or actions.An overly complex or unclear organisational structure could be indicative of more serious problems.A
The governing body should exercise ongoing oversight of risk management and ensure that particular objectives are achieved.What are the objectives that should be met in terms of the King IV™ report?
Risks are an integral part of any business striving to achieve its objective.What is the denition of risk according to the King IV™ report?
Discuss any instances of non-compliance with the King IV™ report and the Companies Act 71 of 2008 with reference to the information provided relating to Diversied Ltd. You may assume that the Companies Act requirements relating to quorums of meetings have been met. You are not required to address
Discuss the effect of your ndings in (1) in terms of section 45 of the Auditing Profession Act 26 of 2005.
Discuss whether Mrs Pink acted in compliance with section 45 of the Companies Act 71 of 2008.
As the senior manager in the technical department of the audit rm of Matthews &Mbowene Inc. with expertise in aspects of the Companies Act 71 of 2008, you have received a query from one of your colleagues and an email from another. You need to respond to these queries separately.1, During the
Per the King IV Report on Corporate Governance™ for South Africa 2016 (King IV™), a company’s audit committee is supposed to, inter alia, oversee both its external and internal auditors.REQUIRED 1, Answer yes or no. In terms of the Companies Act 71 of 2008, it is compulsory for the following
You have recently been appointed as an audit manager at the audit rm of General Practitioners of Excellence Inc., which has entrusted you with the audit of Goodies Ltd, a company that was incorporated by its chief executive officer, Mike Goods.Goodies Ltd manufactures and sells ceramic teapots, and
List the criteria with which an appointed auditor of a company must be satised, according to section 44 of the Auditing Profession Act 26 of 2005, before expressing an unqualied opinion on a company’s nancial statements.
Discuss each person’s eligibility to be registered as an auditor in terms of the Auditing Profession Act 26 of 2005. Motivate your answer.
Section 45 of the Auditing Profession Act 26 of 2005 imposes an obligation on registered auditors to report a reportable irregularity to the IRBA if certain requirements are met.REQUIRED List and briey explain the elements that constitute a reportable irregularity.
You are a CA(SA) and registered auditor and were appointed as an audit partner of Frazer Inc. (Frazer), an established auditing rm. e following represents clients and potential clients of Frazer:Shop Ltd (Shop) is a popular grocer and one of the largest retailers in the country, and is the
Hush Ltd (Hush) placed an advertisement in a newspaper, after the resignation of its auditors, to call for prospective auditing rms to come and do a presentation on the audit approach they would follow as well as an estimation of their audit fees. Your auditing rm, Rush Inc. (Rush), which is
Frans van Zyl CA(SA), the audit manager on the audit of Mountain Limited (Mountain) bought 1000 shares in Foothill Limited (Foothill)on 30 April 20X1. Frans was involved in the due diligence review of Foothill, conducted for Mountain, during April 20X1. Foothill was taken over by Mountain on 1 June
List, and briey explain, the ve threats dealt with in the SAICA Code of Professional Conduct.
What is the connection between independence and the fundamental principle of objectivity?
List the steps that should be followed when applying the conceptual framework approach.
Why is this approach used?
Capital budgeting is (a) concerned with analyzing alternative sources of capital, including debt and equity, (d) an important activity for companies when considering what assets to acquire or sell, or (c) best done by intuitive assessments of the value of assets and their usefulness.
Why are capital budgeting decisions often difficult?
A company is considering purchasing equipment costing $75,000. Future annual net cash flows from this equipment are $30,000, $25,000, $15,000, $10,000, and $5,000. The payback period is (a) 4 years, (b) 3.5 years, or (c) 3 years.
If depreciation is an expense, why is it added back to an investment's net income to compute the net cash flow from that investment?
The following data relate to a company's decision on whether to purchase a machine:Cost.$ 180,000 Salvagevalue. 15,000 Annual after-tax netincome. 40,000 The machine's accounting rate of return, assuming the even receipt of its net cash flows dur¬ ing the year and use of straight-line
Is a 15% accounting rate of return for a machine a good rate?
A company can invest in only one of two projects, A or B, Each project requires a $20,000 investment and is expected to generate end-of-period, annual cash flows as follows:Assuming a discount rate of 10%, which project has the higher net present value? Year I Year 2 Year 3 Total Project A.....
Two investment alternatives are expected to generate annual cash flows with the same net present value (assuming the same discount rate applied to each). Using this information, can you conclude that the two alternatives are equally desirable?
When two investment alternatives have the same total expected cash flows but differ in the timing of those flows, which method of evaluating those investments is superior,(a) accounting rate of return or (b) net present value?
A company receives a special order for 200 units that requires stamping the buyer's name on each unit, yielding an additional fixed cost of $400 to its normal costs. Without the order, the company is operating at 75% of capacity and produces 7,500 units of product at the following
What are the incremental costs of accepting additional business?
A company has already incurred a $1,000 cost in partially producing its four products. Their selling prices when partially and fully processed follow with additional costs necessary to finish these partially processed unitsWhich product(s) should not be processed further, (a) Alpha, (b) Beta, (c)
A company is considering the purchase of equipment for $270,000. Projected annual cash inflow from this equipment is $61,200 per year. The payback period is:a. 0.2 yearsb. 5.0 yearsc. 4.4 yearsd. 2.3 yearse. 3.9 years
Acompany buys a machine for $180,000 that has an expected life of nine years and no salvage value. The company expects an annual net income (after taxes of 30%) of $8,550. What is the accounting rate of return?a. 4.75%b. 42.75%c. 2.85%d. 9.50%e. 6.65%
Peng Company is considering an investment expected to generate an average net income after taxes of $1,950 for three years. The investment costs $45,000 and has an estimated $6,000 salvage value. Compute the accounting rate of return for this investment; assume the company uses straight-line
Heels, a shoe manufacturer, is evaluating the costs and benefits of new equipment that would custom fit each pair of athletic shoes. The customer would have his or her foot scanned by digital computer equipment; this information would be used to cut the raw materials to provide the customer a
Managerial accounting produces information (a) to meet internal users' needs, {b) to meet a user's specific needs, (c) often focusing on the future, or id) all of these.
What is the difference between the intended users of financial and managerial accounting?
Do generally accepted accounting principles (GAAP) control and dictate managerial accounting?
Which type of cost behavior increases total costs when volume of activity increases?
How could traceability of costs improve managerial decisions?
What are the three types of inventory on a manufacturing company's balance sheet?
How does cost of goods sold differ for merchandising versus manufacturing companies?
A manufacturing statement (a) computes cost of goods manufactured for the period,(b) computes cost of goods sold for the period, or (c) reports operating expenses incurred for the period.
Are companies required to report a manufacturing statement?
How are both beginning and ending goods in process inventories reported on a manufacturing statement?
Understanding the classification and assignment of costs is important. Consider a company that manufactures computer chips. It incurs the following costs in manufacturing chips and in operating the company.1 . Plastic board used to mount the chip, $3.50 each.2 . Assembly worker pay of $15 per hour
A manufacturing company’s balance sheet and income statement differ from those for a merchandising or service company.Required 1. Fill in the [BLANK] descriptors on the partial balance sheets for both the manufacturing company and the merchandising company. Explain why a different presentation is
The following account balances and other information are from SUNN Corporation’s accounting records for year-end December 31, 2013. Use this information to prepare (1) a table listing factory overhead costs, (2) a manufacturing statement (show only the total factory overhead cost), and (3) an
Explain the purpose and nature of, and the role of ethics in, managerial accounting.
Describe accounting concepts useful in classifying costs
Define product and period costs and explain how they impact financial statements
Explain how balance sheets and income statements for manufacturing and merchandising companies differ
Explain manufacturing activities and the flow of manufacturing costs.
Describe trends in managerial accounting.
Prepare a manufacturing statement and explain its purpose and links to financial statements
Costs that are incurred as part of the manufacturing process, but are not clearly traceable to the specific unit of product or batches of product, are calleda. Period costs.b. Factory overhead.c. Sunk costs.d. Opportunity costs.e. Fixed costs.
The three major cost components of manufacturing a product area. Direct materials, direct labor, and factory overhead.b. Period costs, product costs, and sunk costs.c. Indirect labor, indirect materials, and fixed expenses.d. Variable costs, fixed costs, and period costs.e. Opportunity costs, sunk
A company reports the following for the current year.Its cost of goods manufactured for the current year isa. $1,500.b. $1,700.c. $7,500.d. $2,800.e. $4,700. Finished goods inventory, beginning year Finished goods inventory, ending year $6,000 3,200 Cost of goods sold 7,500
Distinguish between (a) factory overhead and (h) selling and administrative overhead.
List the four components of a manufacturing statement and provide specific examples of each for Polaris.
Managerial accounting (choose one)1. Is directed at reporting aggregate data on the company as a whole.2. Provides information that is widely available to all interested parties.3. Must follow generally accepted accounting principles.4. Provides information to aid management in planning and

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Fundamental Accounting Principles Volume 2 21st Edition John Wild, Ken Shaw, Barbara Chiappetta - Solutions

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