You are in a team from Manna Auditors & Co, and performing the year-end audit for...

  

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You are in a team from Manna Auditors & Co, and performing the year-end audit for Karisma Daily Sdn. Bhd. Below is the Bank Reconciliation Statement for Karisma Dairy Sdn. Bhd, as at 31 May 20x2, its year-end: Balance per bank statement, 31 May 20x2 Add: Bank error Deposits in transit: Karisma Dairy Sdn. Bhd. Bank Reconciliation 31 May 20x2 30 May 20x2 (ref A421) 31 May 20x2 (ref A422) Less: Outstanding cheques: No. 3292 No. 3501 No. 3502 No. 3512 No. 3515 No. 3523 No. 3528 Balance per bank in the general ledger, 31 May 20x2 RM 4,512 5,276 9,214 677 2,638 825 1,459 410 5,943 RM 74,865 3,200 9.788 87,853 21,166 109,019 Additional notes: 1. The correction of bank error relates to an error that the bank made by clearing a RM3,200 cheque against Karisma's, account in May, when in fact the cheque was not issued by Karisma Dairy Sdn Bhd. The cheque documentation included with the bank statement indicated that the cheque was actually issued by Kasturi Daily Sdn Bhd. 2. During the audit of the payroll cycle, your team discovered one fictitious employee, and a cheque was already made out to this non-existent employee. The cheque number is 3515, for the amount of RM1,459. Required: a) In relation to the audit of the bank balance, provide answers to the following: 1. State ONE (1) test that you would perform to check the bank error entry into the bank reconciliation. (1 mark) i. Describe THREE (3) audit procedures that you would carry out to test the bank reconciliation above. (6 marks) b) In relation to the issue of the outstanding cheque to the fictitious employee, provide answers to the following: i. Describe ONE (1) test that you would perform to check this issue. (2 marks) ii. Assuming the issue is true (i.e. there was indeed a cheque issued to a fictitious employee), suggest and explain ONE (1) recommended course of action to Karisma Dairy Sdn. Bhd. to rectify or intercept the payment. (2 marks) iii. Suggest ONE (1) control measure to Karisma Daily for its payroll system to avoid a similar issue recurring in future. (2 marks) You are in a team from Manna Auditors & Co, and performing the year-end audit for Karisma Daily Sdn. Bhd. Below is the Bank Reconciliation Statement for Karisma Dairy Sdn. Bhd, as at 31 May 20x2, its year-end: Balance per bank statement, 31 May 20x2 Add: Bank error Deposits in transit: Karisma Dairy Sdn. Bhd. Bank Reconciliation 31 May 20x2 30 May 20x2 (ref A421) 31 May 20x2 (ref A422) Less: Outstanding cheques: No. 3292 No. 3501 No. 3502 No. 3512 No. 3515 No. 3523 No. 3528 Balance per bank in the general ledger, 31 May 20x2 RM 4,512 5,276 9,214 677 2,638 825 1,459 410 5,943 RM 74,865 3,200 9.788 87,853 21,166 109,019 Additional notes: 1. The correction of bank error relates to an error that the bank made by clearing a RM3,200 cheque against Karisma's, account in May, when in fact the cheque was not issued by Karisma Dairy Sdn Bhd. The cheque documentation included with the bank statement indicated that the cheque was actually issued by Kasturi Daily Sdn Bhd. 2. During the audit of the payroll cycle, your team discovered one fictitious employee, and a cheque was already made out to this non-existent employee. The cheque number is 3515, for the amount of RM1,459. Required: a) In relation to the audit of the bank balance, provide answers to the following: 1. State ONE (1) test that you would perform to check the bank error entry into the bank reconciliation. (1 mark) i. Describe THREE (3) audit procedures that you would carry out to test the bank reconciliation above. (6 marks) b) In relation to the issue of the outstanding cheque to the fictitious employee, provide answers to the following: i. Describe ONE (1) test that you would perform to check this issue. (2 marks) ii. Assuming the issue is true (i.e. there was indeed a cheque issued to a fictitious employee), suggest and explain ONE (1) recommended course of action to Karisma Dairy Sdn. Bhd. to rectify or intercept the payment. (2 marks) iii. Suggest ONE (1) control measure to Karisma Daily for its payroll system to avoid a similar issue recurring in future. (2 marks)

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a In relation to the audit of the bank balance i To check the bank error entry we would perform a bank confirmation or bank reconciliation This would ... View the full answer