General Audit Planning Information: Materiality=$40,000 PAJE Scope = $2,000 Audit Findings: 1. When auditing prepaid expenses,...

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General Audit Planning Information: Materiality=$40,000 PAJE Scope = $2,000 Audit Findings: 1. When auditing prepaid expenses, it was discovered that the prepaid insurance account was overstated by $49,250 due to the company failing to record the appropriate amount of expense. The CFO wants to record this entry to fix this outage. 2. When auditing accounts receivable, the sample of items tested revealed an error of $1,000 which extrapolated to an error of $18,425. As this is an extrapolated error, versus a true error, the client does not want to make this entry. 3. When auditing the bank reconciliation for the Cash Operating account at Chase, a $635 error was discovered. The client will not correct this error until they perform the January 2021 bank reconciliation process. 4. During the audit of the debt section, an audit team member discovered that interest was not accrued for the full amount owed as of December 31, 2020. The recalculated amount of accrued interest showed the total in that account should be $18,680. The client does not want to correct their books for this error. 5. During the audit of the inventory section, there were tests performed to determine whether goods were stated at the lower of cost of market. Results of the tests showed there was an item that was overstated by $59,750. The client has agreed to reduce their inventory balance for the writedown of this item. 6. When recalculating the amount that should have been accrued for property taxes, you determined the company did not increase their monthly entry to account for the purchase of their new building. You determined the total amount accrued should be $76,800. Due to the magnitude of this error, the client will adjust their books at December 31, 2020. General Audit Planning Information: Materiality=$40,000 PAJE Scope = $2,000 Audit Findings: 1. When auditing prepaid expenses, it was discovered that the prepaid insurance account was overstated by $49,250 due to the company failing to record the appropriate amount of expense. The CFO wants to record this entry to fix this outage. 2. When auditing accounts receivable, the sample of items tested revealed an error of $1,000 which extrapolated to an error of $18,425. As this is an extrapolated error, versus a true error, the client does not want to make this entry. 3. When auditing the bank reconciliation for the Cash Operating account at Chase, a $635 error was discovered. The client will not correct this error until they perform the January 2021 bank reconciliation process. 4. During the audit of the debt section, an audit team member discovered that interest was not accrued for the full amount owed as of December 31, 2020. The recalculated amount of accrued interest showed the total in that account should be $18,680. The client does not want to correct their books for this error. 5. During the audit of the inventory section, there were tests performed to determine whether goods were stated at the lower of cost of market. Results of the tests showed there was an item that was overstated by $59,750. The client has agreed to reduce their inventory balance for the writedown of this item. 6. When recalculating the amount that should have been accrued for property taxes, you determined the company did not increase their monthly entry to account for the purchase of their new building. You determined the total amount accrued should be $76,800. Due to the magnitude of this error, the client will adjust their books at December 31, 2020.

Answer rating: 100% (QA)

ANSWERS 1 Materiality for this error 4925040000 123125 2 Materia... View the full answer