Recording trasactions and internal Control

Published:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Assignment 6

Date: 2/16/2014

14-21a.(2)b.(1)c.(3)d.(4)

14-22a.(4)b.(3)c.(1)d.(2)

14-23a.(4)b.(4)c.(2)

14-24

1.

  1. Sales which are recorded are to valid consumers who are capable to pay (occurrence).
  2. Choose a sample of sales accounted or recorded in the sales journal, as well as decide if the right individuals permitted the corresponding purchaser order.
  3. Sales may perhaps be overstated if a consumer is not capable to pay for the products.
  4. Look at sales returns along with write-offs of accounts throughout the year to decide if returns plus write-offs are the consequence of consumers incapable to pay. Evaluate aging of accounts receivable to decide if accounts in older aging groups consist of sales transactions that are doubtful to be collected.

2.

  1. In the sales system the online sales are recorded (completeness).
  2. Evaluate the online sales method documentation, along with construct inquiries of customer personnel to agree on that the automatic boundary is a component of the system design. In online sales enter a sample of test transactions to agree on if test data are consists of in the sales journals. Repeal each and every one test data objects.
  3. In the sales account the online sales may perhaps not be recorded, which could understate sales.
  4. Mark out a sample of online sales transactions used for the sales journal.

3.

  1. Recorded sales transactions are payable/billed by means of approved costs (accuracy).
  2. Attain a list of preapproved unit costs in the master file. In the sales system enter product numbers to establish if the unit price accessible is accurate. Make inquiries regarding access rights to the master file. To access the master file attempt to login.
  3. Using incorrect amounts sales transactions could be recorded.
  4. Evaluate a sample of costs on a sample of sales invoices to the accepted prices lists at the time the sale take place.

4.

  1. Obtainable sales transactions are recorded (completeness), as well as sales are recorded on the accurate dates (timing).
  2. Make inquiries of shipping personnel regarding the procedure they make use of forward shipping papers to accounting, along with examine the timeliness of when that take place.
  3. Products shipped may perhaps not be recorded in the sales journal at each and every one otherwise in the incorrect time period.
  4. Contrast date per shipping order to date of redistribution in sales journal used for a sample of shipments.

5.

  1. When shipments actually made sales are recorded (occurrence), and each and every one shipment are recorded the same as sales (completeness).
  2. Evaluate the customer’s records used for the order of bills of lading.
  3. Shipments might be recorded two times (for the duplicate bills of lading), which could overstate sales, otherwise shipments may possibly not be recorded (for the reason of omitted bills of lading), which might understate sales.
  4. Evaluate the list of bills of lading to decide if there is replica otherwise missing documents.

6.

  1. When shipments actually made sales are recorded (occurrence).
  2. Evaluate systems documentation as well as formulate inquiries of staff to agree on if the sales application is programmed to simply set aside recording of sales with a applicable bill of lading number. Attempt to go through a sales transaction into the sales journal devoid of a bill of lading number to decide if the transaction is discarded.
  3. Even though products have not been shipped to consumers sales could be recorded.
  4. Evaluate the sales journal to decide if there is a matching bill of lading used for a sample of sales journal entries.

7.

  1. Recorded sales are used for the accurate amounts (accuracy).
  2. Evaluate a sample of sales transactions to decide if there is documentation of the independent confirmation.
  3. Sales might or could be misstated for the reason that they are recorded at erroneous amounts.
  4. In favor of a sample of sales transactions, confirm the accurateness of the sales amount.

8.

  1. Each and every one cash sales are recorded (completeness).
  2. Make inquiries regarding responsibility for individuals accountable for cash collections, as well as examine whether they have access to accounting otherwise shipping role.
  3. The individual handling cash collections may perhaps misappropriate cash as well as not record the cash sale in accounting proceedings.
  4. Outline a sample of shipments to decide if they have been recorded the same as sales in the accounting proceedings.

9.

  1. Sales transactions are appropriately consists of in the accounts receivable master file as well as are appropriately sum up (posting plus summarization).
  2. Look at proof that the accounts receivable master file match up to the general ledger used for accounts receivable.
  3. The accounts receivable master file does not replicate transactions that are consists of in the finishing accounts receivable general ledger balance.
  4. The dates of entry in the sales journal and the sample of sales transactions should be compare to the date the transactions are posted and also the the accounts receivable master file.

15-22a.(3)b.(1)c.(1)d.(1)

15-24a.(4)b.(3)c.(2)

15-25

a

Sampling entity

Provide number to the system for the population

Excel Formula

  1. Sales invoice

Every one of the invoices are numbered from 0001 to 8274

=RANDBETWEEN(1,8274)

  1. Bill of lading

Every one of bills of lading numbered from 18221 to 29427 ( the left-most digit “2” be able to be dropped, if a random number table is utilize)

=RANDBETWEEN(18221, 29427)

  1. Customer

A duo of random numbers is exists where the first random number is in the page number of 1 though 20 , along with the second random number is the line number on the page 1 though 50

=RANDBETWEEN(1,20)

and

=RANDBETWEEN(1,50)

  1. the sales journal that contain a sales invoice recorded on the line numbers

A duo of random numbers where the first random number is the pages of 1 though 215, in addition to the second random number is the invoice like counted down from the top of the page 1 though 100

=RANDBETWEEN(1,215)

and

=RANDBETWEEN(1,100)

b

First five numbers using systematic selection

Sampling Entity

interval

Initiate point but randomly

1st 5 items

  1. Sales invoice

(8274÷75)= 110

39

39

149

259

369

479

  1. Bill of lading

[(29427-18221) = 11206÷75]=149

18259

18259

18408

18557

18706

18855

  1. Customer

(979 lines÷75)=13

Page 1, line #11

PgLine

111

124

137

150

213

The extent of the interval is rounded down to make certain that each and every one line numbers chosen are within the definite population. By systematic selection, the description of the sampling entity for decide on the selection interval used for population 3 is the sum number of lines in the population. In additionally, the command used for choosing the random number is able to be entered straightforwardly onto the spreadsheet, otherwise it is able to be chosen from the function menu such as the math and trig functions. It may perhaps be obligatory to adjoin the analysis tool set to access the RANDBETWEEN function. Therefore, once the formula is go through, it be capable of be copied down to choose supplementary random numbers. When a duo of random numbers is necessary, the formula used for the first random number be able to be go through in the first column, along with the formula used for the second random number be able to be entered in the second column.

16-20a.(4)b.(4)c.(2)

16-21a.(4)b.(2)c.(2)

16-22a.(3)b.(1)c.(3)

16-24

a. Balance related audit object

b. Internal Control that could prevent

c. Test of details of balances audit Procedure

1.The accounts receivable in the aged trial balance consent with associated master file amounts, along with the totality is appropriately added and give consent with the general ledger.

The purchaser is supposed to provide foot the trial balance as well as reconcile the full amount to the balance in the general ledger.

The auditor be supposed to foot the trial balance of A/R along with reconcile it to the balance per the general ledger.

2.Obtainable A/R are consists of in the aged trial balance (totality or completeness).

The A/R master file is supposed to be reconciled to the control account occasionally via an independent individual.

In this area the foot should be aged trial balance as well as contrast the full amount to the general ledger.

Trace a sample of accounts as of the master file to the aged trial balance to decide if everything is incorporated.

3.A/R be real

(Existence).

The A/R master file is supposed to be reconciled to the control account occasionally via an independent individual.

In this area the foot should be aged trial balance as well as contrast the full amount to the general ledger.

Trace from the aged trial balance to the master file, finding for replica.

4.Transactions are documented in the appropriate period (cutoff).

The consumer is supposed to set up cutoff actions so that only shipments completed before year-finish/end are documented like current period sales.

Look at shipping papers used for sales recorded right away before plus after year end to test whether sales are accounted in the appropriate period.

5.A/R are affirmed at a realizable value

(realizable value)

The customer be supposed to execute an analysis of the collectability of A/R at the end of the year as well as be supposed to commune with its consumers to decide the probability of the collectability of person accounts.

The auditor is supposed to remain knowledgeable of current economic situation and think about their consequence on collectability of A/R for the consumer.

The auditor may perhaps contrast cash receipts subsequent to year-end to the cash receipts of the similar period of the preceding year and think any changes like to their consequence on the collectability of the A/R.

6.A/R is affirmed at the accurate amounts (accuracy).

The customer be supposed to record declares for faulty merchandise as soon as feasible after the declare is established to keep A/R balances as precise as probable.

The auditor is supposed to note any respond to the verification of A/R that point out disputes among a purchaser and customer

The auditor is supposed to evaluate the client's correspondence files from consumers.

7.The corporation has rights to A/R (rights and responsibility) (as well presentation plus revelation).

The controller is supposed to keep up a agenda containing every obligatory disclosure data, consists of pledging otherwise other limitations on A/R

The auditor's regular bank verification is supposed to enclose an examination as to assets pledged used for loans from that organization.

When loan verifications are sent via the auditor, they be supposed to enclose an investigation as to any assets pledged in favor of the gratitude.

8.Transactions are documented in the appropriate period (cutoff).

The customer be supposed to go after a rule of holding open the books to record whichever returns in the following period that be relevant to goods shipped as well as sales recorded in the present period.

The auditor is supposed to evaluate returns recorded in the following period to decide if they be relevant to products shipped as well as sales recorded proceeding to year-end.

The auditor is supposed to execute an analytical test to decide whether or else not returns in the 1st month of the subsequently year are comparable in extent to those experienced in the similar period of preceding years.

9.A/R are appropriately categorize (classification).

The customer is supposed to sustain split accounts for the recording of receivables outstanding from affiliated corporations.

The auditor is supposed to evaluate the trial balance of A/R to decide whether otherwise not accounts from affiliated corporations are consists of in the purchaser accounts.

The auditor is supposed to be responsive of affiliated corporations along with the transactions among them plus the customer and be supposed to query and go after up to decide that A/R from affiliates are not consists of in the A/R from consumers.

17-28

a.

Sample size = (Book value/tolerable misstatement) x assurance factor)

92 = (6,900,000÷150,000) x 2

b.

I think that if poor results were acquired for tests of controls as well as substantive tests of transactions for sales returns and allowances, sales, along with cash receipts, the obligatory sample size for tests of details of balances would require to be greater than before. By means of the formula in the question, the auditor would amplify or increase the sample size via increasing the assurance aspect. This has the similar effect like identifying a lower ARIA (acceptable risk of incorrect acceptance).

c.

I believe a systematic sample be capable of be chosen depend on the number of accounts otherwise the dollar value of the population. To choose a systematic sample depends on the number of accounts and the total number of accounts in the population is separated via the necessary sample size to decide the interval .In additionally, a random number is then chosen among 1 along with the interval like the initial point. For the reason that every account has an equivalent probability of selection, this technique is suitable if each and every accounts are identical in size otherwise if the population is stratified into 2 or else additional samples.

To choose a systematic sample depend on the dollar value of the population and the population value is divided via the necessary sample size to acquire the suitable interval. In additionally, a random number is then chosen among one along with the interval the same as the starting point. Therefore, the interval is additional to the starting point to decide the dollar units chosen. Accounts are chosen for testing where the cumulative total of A/R consists of the random number. This technique of selection is identical to monetary unit selection, as well as accounts superior than the amount of the interval are automatically chosen using this technique.

d.

The direct projection of fault is determined using the sample is calculated below:

(Errors in sample ÷ sample book value) x population book value

= (1,500÷230,000) x 6,900,000

= $45,000 overstatement.

The projected error of $45,000 is superior below tolerable misstatement of $150,000 as well as gives an allowance used for sampling risk of $105,000. For that reason, the population is consider to be fairly stated.

Writing Services

Essay Writing
Service

Find out how the very best essay writing service can help you accomplish more and achieve higher marks today.

Assignment Writing Service

From complicated assignments to tricky tasks, our experts can tackle virtually any question thrown at them.

Dissertation Writing Service

A dissertation (also known as a thesis or research project) is probably the most important piece of work for any student! From full dissertations to individual chapters, we’re on hand to support you.

Coursework Writing Service

Our expert qualified writers can help you get your coursework right first time, every time.

Dissertation Proposal Service

The first step to completing a dissertation is to create a proposal that talks about what you wish to do. Our experts can design suitable methodologies - perfect to help you get started with a dissertation.

Report Writing
Service

Reports for any audience. Perfectly structured, professionally written, and tailored to suit your exact requirements.

Essay Skeleton Answer Service

If you’re just looking for some help to get started on an essay, our outline service provides you with a perfect essay plan.

Marking & Proofreading Service

Not sure if your work is hitting the mark? Struggling to get feedback from your lecturer? Our premium marking service was created just for you - get the feedback you deserve now.

Exam Revision
Service

Exams can be one of the most stressful experiences you’ll ever have! Revision is key, and we’re here to help. With custom created revision notes and exam answers, you’ll never feel underprepared again.