Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Chapter 10, Problem 26QRA
a.
To determine
Explain the reasons responsible for strengthening the internal control in case of listing of cash receipt.
b.
To determine
Explain the duties that should not be performed by an employee assigned to prelist the cash receipts in order to avoid chances of embezzlement.
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You are auditing the Digos People’s Cooperative with a substantial annual sales, all of which are billed and collected locally. During your preliminary review of internal control, you discover the following procedures for handling cash receipts:
Cash collections on over-the-counter and COD sales are received by the cashier from the customer or from the delivery service. Upon receiving cash, the cashier stamps the sales ticket “paid” and files a copy. The only record of COD sales is a copy of the sales ticket, which is given to the cashier to hold until cash is received from the delivery service.
Mail is opened by the credit manager’s secretary, and remittances are given to the credit manager for review. The credit manager then places the remittances in a try on the cashier’s desk. At the time of the daily deposit – called “deposit cutoff time” – the cashier delivers the checks and currencies to the assistant credit manager, who prepares remittance lists and the bank deposit, and…
Chapter 10 Solutions
Principles Of Auditing & Other Assurance Services
Ch. 10 - Prob. 1RQCh. 10 - Prob. 2RQCh. 10 - Prob. 3RQCh. 10 - Prob. 4RQCh. 10 - Prob. 5RQCh. 10 - Prob. 6RQCh. 10 - Prob. 7RQCh. 10 - Prob. 8RQCh. 10 - Prob. 9RQCh. 10 - Prob. 10RQ
Ch. 10 - Prepare an example of lapping of cash receipts,...Ch. 10 - Prob. 12RQCh. 10 - Prob. 13RQCh. 10 - Prob. 14RQCh. 10 - Prob. 15RQCh. 10 - Prob. 16RQCh. 10 - Explain two procedures by which auditors may...Ch. 10 - Prob. 18RQCh. 10 - Prob. 19RQCh. 10 - Prob. 20RQCh. 10 - Prob. 21RQCh. 10 - Prob. 22RQCh. 10 - Prob. 23RQCh. 10 - Prob. 24RQCh. 10 - Prob. 25RQCh. 10 - Prob. 26QRACh. 10 - Henry Mills is responsible for preparing checks,...Ch. 10 - During the first few months of the year, John...Ch. 10 - Prob. 29QRACh. 10 - Prob. 30QRACh. 10 - Prob. 31QRACh. 10 - Prob. 32QRACh. 10 - Prob. 33QRACh. 10 - Prob. 34QRACh. 10 - Prob. 35QRACh. 10 - Prob. 36QRACh. 10 - Prob. 37QRACh. 10 - Select the best answer for each of the following...Ch. 10 - Prob. 38BOQCh. 10 - Prob. 38COQCh. 10 - Prob. 38DOQCh. 10 - Prob. 38EOQCh. 10 - Prob. 38FOQCh. 10 - Reconciliation of the bank account should not be...Ch. 10 - The auditors suspect that a clients cashier is...Ch. 10 - Prob. 38IOQCh. 10 - Prob. 38JOQCh. 10 - Prob. 38KOQCh. 10 - Prob. 38LOQCh. 10 - Which of the following represents a correct...Ch. 10 - Which of the following correctly identifies a risk...Ch. 10 - Which of the following correctly identifies a risk...Ch. 10 - Prob. 39DOQCh. 10 - Prob. 39EOQCh. 10 - Prob. 39FOQCh. 10 - Prob. 40OQCh. 10 - Prob. 41OQCh. 10 - Prob. 42OQCh. 10 - Prob. 43OQCh. 10 - Prob. 44OQCh. 10 - Prob. 45OQCh. 10 - Prob. 46PCh. 10 - Prob. 47PCh. 10 - Prob. 48PCh. 10 - Prob. 49PCh. 10 - Prob. 50ITCCh. 10 - Prob. 51ITCCh. 10 - Prob. 52RDCCh. 10 - Prob. 53EC
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- You are the in-charge auditor examining the financial statements of the Gutzler Company for the year ended December 31. During late October, with the help of Gutzler’s controller, you completed an internal control questionnaire and prepared the appropriate memoranda describing Gutzler’s accounting procedures. Your comments relative to cash receipts are as follows:∙ All cash receipts are sent directly to the accounts receivable clerk with no processing by the mail department. The accounts receivable clerk keeps the cash receipts journal, prepares the bank deposit slip in duplicate, posts from the deposit slip to the subsidiary accounts receivable ledger, and mails the deposit to the bank.∙ The controller receives the validated deposit slips directly (unopened) from the bank. She also receives the monthly bank statement directly (unopened) from the bank and promptly reconciles it.∙ At the end of each month, the accounts receivable clerk notifies the general ledger clerk by journal…arrow_forwardABC Manufactures is a manufacturing company, and your audit team is conducting the annual audit of its financial statements. As part of the audit procedures, you are tasked with testing the accounts receivable balance. ABC Manufactures has a significant accounts receivable balance owing to its diverse customer base. Upon initiating the audit procedures, your team sends out accounts receivable confirmations to one of ABC Manufactures largest customers with a material accounts receivable balance outstanding. However, several weeks have passed, and the confirmation has not been returned. The audit team has made follow-up attempts via phone calls and emails, but there has been minimal response. Considering the lack of responsiveness, the audit team is becoming increasingly skeptical about the effectiveness of the confirmation process in this particular situation. Describe two alternative audit procedures that the audit team may conduct that may assist them in gathering sufficient…arrow_forwardJanice Dodds opens the mail for Ajax Plumbing Company. She lists all customer checks on a spreadsheet that includes the name of the customer and the check amount. The checks, along with the spreadsheet, are then sent to Jim Seymour in the accounting department, who records the checks and deposits them daily in the company’s checking account. Required: Describe how the company could improve its internal control procedure for the handling of its cash receipts.arrow_forward
- Which of the following circumstances would most likely cause an audit team to performextended procedures?a. Supporting documents are produced when requested.b. The client made several large adjustments at or near year-end.c. The company has recently hired a new chief financial officer after the previous oneretired.d. The company maintains several different petty cash fundsarrow_forwardSharon, an audit manager assigned to the audit of Newsome Corporation is observing the client's revenue-receivables cycle. Sharon observes that the IT system responsible for processing and posting receivable transactions produces a daily exceptions report which is emailed to an accounts receivable clerk responsible for investigating the exceptions. Which of the following most accurately describes the type of control that is responsible for determining possible exceptions and forwarding them on to the accounts receivable clerk? • This type of control is typically referred to as a detective control. These types of controls usually assist the client in detecting items that need further investigation. These controls help to minimize misstatements in the financial statements. • This type of control is typically known as a manual IT control. This name is derived from the fact that although the control allows initial processing by the client's IT system, it is flagged for manual follow up. •…arrow_forwardAn auditor suspects that a client's cashier is misappropriating cash receipts for personal use by lapping customer checks received in the mail. In attempting to uncover this embezzlement scheme, the auditor most likely would compare the Group of answer choices Daily cash summaries with the sums of the cash receipts journal entries. Individual bank deposit slips with the details of the monthly bank statements. Dates checks are deposited per bank statements with the dates remittance credits are recorded. Dates uncollectible accounts are authorized to be written off with the dates the write-offs are actually recorded.arrow_forward
- By preparing a four-column bank reconciliation ("proof of cash") at year-end, an auditor will generally be able to detect: a. An unrecorded deposit made at the bank at the end of the month. b. A second payment of an account payable which had already been paid in full two months earlier. c. An embezzlement of cash receipts not recorded in the cash receipts journal before they had been deposited into the bank. d. A receivable collected that had previously been written off as uncollectible.arrow_forwardIn your audit of Ginko Company, you have received a cash confirmation and a cutoff statement from the bank on Ginko’s one bank account. Prepare a list of substantive procedures for Ginko’s casharrow_forwardAs one of the year-end audit procedures, the auditor instructed the client's personnel to prepare a confirmation request for a bank account that had been closed during the year. After the client's treasurer has signed the request, it was mailed by the assistant treasurer. What is the major flaw in this audit procedure? a. The confirmation request was signed by the treasurer. b. Sending the request was meaningless because the account was closed before the year end. c. The request was mailed by the assistant treasurer. d. The CPA did not sign the confirmation request before it was mailed.arrow_forward
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