AUDITING I-ACCT 2007 001, CRN: 82728-202003

GRADED AUDIT EXECUTION ASSIGNMENT 2-DUE FOR ONLINE SUBMISSION AUGUST 5, 2021

PART I

You are auditing general cash for Resilience Supplies Inc. for the fiscal year ended July 31. The client has not prepared the July 31 bank reconciliation. After a brief discussion with the owner, you agree to prepare the reconciliation with assistance from one of Resilience Supplies' clerks. Youhave obtained the following information:

General Ledger

$60,183 64,897 (49,117)

$75,963

Bank Statement

$75,680 63,433

(45,184)

(105) (12,840)(1,840)$79,144

Beginning balance Deposits

Cash receipts journal Cheques cleared

Cash disbursements journal July bank service charge Note paid directly

Customer NSF cheque Ending balance

Balance per bank Deposits in transit Outstanding cheques Balance per books

In addition, the following information is obtained:

June 30 Bank Reconciliation: Information in General Ledger and Bank Statement

$75,680 6,700 23,250 60,183

1. Cheques clearing that were outstanding on June 30 totaled $8,350.
2. Cheques clearing that were recorded in the July disbursements journal totaled $36, 834.
3. A cheque for $4,600 cleared the bank but had not been recorded in the cash
4. disbursements journal. It was for an acquisition of inventory. Resilience Supplies uses
5. the periodic inventory method.
6. A cheque for $1,053,written on an associated company's bankaccount, was charged to
7. Resilience Supplies.
8. Deposits included $6,700 from June and $56,733 for July.
9. ThebankwithdrewfromResilienceSupplies'accountanonsufficientfunds(NSF)
10. customer cheque totaling $1,840. The credit manager concluded that the customer intentionally closed its account and that the owner had left the city. The account was turned over to a collection agency.
11. The bank deducted $12,000 plus interest from Resilience Supplies'account for a loan made by the bank under an agreement signed four months ago. The note payable was recorded at $12,000 on Resilience Supplies'books.

Required

1. Prepare a bank reconciliation that shows both the unadjusted and adjusted balances
2. per the general ledger.
3. Identifythenatureofadjustmentsrequired.

AUDITING I-ACCT 2007 001, CRN: 82728-202003

GRADED AUDIT EXECUTION ASSIGNMENT 2-DUE FOR ONLINE SUBMISSION AUGUST 5, 2021

PART II

Below are seven potential misstatements due to errors or fraud, preceded by a list of auditing procedures (a through h) the auditor could consider performing to gather evidence to determine whether an error or fraud is present.

List of Auditing Procedures

1. Send a standard bank confirmation confirming the balance in the bank at year-end.
2. Compare the details of the cash receipts journal entries with the details of the
3. corresponding daily deposit slips.
4. Count the balance in petty cash at year-end.
5. Agree gross amount on payroll cheques to approved hours and pay rates.
6. Obtain the cutoff bank statement and compare the cleared cheques to the year-end
7. reconciliation.
8. Examine invoices, receipts, and other documentation supporting reimbursement of
9. petty cash.
10. Examine payroll cheques clearing after year-end with the payroll journal.
11. Prepare a bank transfer schedule.

Required

For each possible misstatement below, identify one audit procedure that would be most effective in providing evidence regarding the potential misstatement. Listed auditing procedures may be used more than once, as applicable. Only indicate the letter corresponding to the correct answer.

1. The auditor suspects that a lapping scheme exists because an accounting department employee who has access to cash receipts also maintains the accounts receivable ledger and refuses to take any vacation or sick days.

2. The auditor suspects that the entity is inappropriately increasing the cash reported on its balance sheet by drawing a cheque on one account and not recording it as an outstanding cheque on that account, while simultaneously recording it as a deposit in a second account.

3. The entity's cash receipts of the first few days of the subsequent yearwere properly deposited in its general operating account after the year- end. However, the auditor suspects that the entity recorded the cash receipts in its books during the last week of the year under audit.

4. The auditor noticed a significant increase in the number of times that petty cash was reimbursed during the year and suspects that the custodian is stealing from the petty cash fund.

5. The auditor suspects that a kiting scheme exists because an accounting department employee who can issue and record cheques seems to be leading an unusually luxurious lifestyle.

6. During tests of the reconciliation of the payroll bank account, the auditor notices that a cheque to an employee is significantly larger than other payroll cheques.

7. The auditor suspects that the controller wrote several cheques and recorded the cash disbursements just before year-end but did not mail the cheques until after the first week of the subsequent year.

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