Based on audit testing, the audit team concluded that the total projected misstatements are as follows: Sales:
Question:
Based on audit testing, the audit team concluded that the total projected misstatements are as follows:
Sales: $235,506
Cash: $258,046
Land: $173,338
The cash misstatement amount is based on the result of a cash confirmation from a bank that was $258,046 less than the reported client balance.
The misstatement in the Land account resulted from Argo's failure to remove the land from its books after donating it to charity.
The Summary of Discovered Misstatements table below shows three sales transactions that contain misstatements:
Summary of Discovered Misstatements (Sales Account) | ||||
---|---|---|---|---|
Selection Number | Reported Sale Amount | Audited Sale Amount | Misstatement | Notes |
5 | $86,178.46 | $68,178.46 | $18,000 | Transposition error |
17 | $217,934.70 | $0 | $217,934.70 | Recorded in wrong accounting period |
21 | $135,476.94 | $135,905.64 | $(428.70) | Incorrect amount recorded |
Total Misstatement | $235,506.00 |
Assume the audit engagement team determined performance materiality to be $240,864 for each account above (note that this amount will likely not agree with the amounts you determined above).
Evaluate each misstatement listed above at the financial statement account level to determine whether or not each would be considered material. Explain your rationale for each misstatement.
Auditing Cases An Interactive Learning Approach
ISBN: 9780134421827
7th Edition
Authors: Mark S Beasley, Frank A. Buckless, Steven M. Glover, Douglas F Prawitt