Assignment$1$

During your audit of the financial statements of The Gary Manufacturing Company for the year ended December $31,2007,$ you find that at January $1,2007,$ the company had installed the following procedures for recording raw material purchases and payables.

a$.$ Vendors' invoices are sent directly to the Accounts Payable department by the Mail department.

b$.$ All documents supporting the invoices are accumulated in the Accounts Payable department and attached to the invoices. After being checked and cash discounts computed, the invoices are entered on computers at workstations.

c$.$ An invoice register is prepared from data compiled on$-$screen.

d$.$ The general ledger control account is posted monthly from the totals shown in the invoice register and all other journals.

e$.$ On due dates, the accounts payable are processed to prepare checks and remittance statements.

f$.$ At the end of the month, unpaid accounts payable are compared with the general ledger control account.

Required: List the procedures you would use to audit raw material purchases.

 

Assignment $2$

Decker is auditing the financial statements of Allright Wholesale Sales, Inc., for the year ended December $31,2007.$ Allright has been in business for many years, although the company has never been audited. Decker is satisfied that ending inventory is fairly stated in all material respects and is considering alternative procedures to audit management's representations about the beginning inventory, which was not observed.

Allright sells only one product, bottled water, and maintains perpetual inventory

records. In addition, Allright takes physical inventory counts monthly. Decker already has confirmed purchases with the supplier and has decided to concentrate on the reliability of perpetual inventory records and on analytical procedures to the extent that data within the prior years' unaudited records will allow.

Required: Design audit procedures, including analytical procedures, that Decker

should apply to evaluate the reliability of perpetual inventory records and to audit the January $1,2007,$ inventory.

 $($AlCPA Adapted$)$

 

 

Assignment $3$

In connection with his audit of the financial statements of Knutson Products Co$.,$ an assembler of home appliances, for the year ended May $31,2007,$ Ray Mendez is reviewing with Knutson's controller the plans for a physical inventory at the company warehouse on May $31,2007.$

Part A$.$ Finished appliances, unassembled parts, and supplies are stored in the warehouse, which is attached to Knutson's assembly plant. The plant will operate during the count. On May $30,$ the warehouse will deliver to the plant the estimated quantities of unassembled parts and supplies required for May $31$ production, but there may be emergency requisitions on May $31.$ During the count, the warehouse will continue to receive parts and supplies and to ship finished appliances. However, appliances completed on May $31$ will be held in the plant until after the physical inventory.

Part B$.$ Warehouse employees will join with Accounting department employees in

counting the inventory. The inventory takers will use a tag system.

Required: For Part A$,$ what procedures should the company establish to assure that

the inventory count includes all items that should be included and that nothing is counted twice? For Part B$,$ what instructions should the company give to the inventory takers?

Answer rating: 100% (QA)

ANSWER Assignment 1 Audit Procedures for Raw Material Purchases Review of Internal Controls Obtain and review the companys written policies and procedures related to raw material purchases and payable... View the full answer