Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Question
Chapter 18, Problem 9DQP
a.
To determine
Indicate the internal control in the Bergeron acquisition and payment cycle.
b.
To determine
Indicate the transaction related audit objectives to which the control relates.
c.
To determine
Indicate the test of control for each control.
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Lamar LLC is in the process of updating its revenues and receivables systems with the implementation of new accounting software. James Loden, Inc. is an independent information technology consultant who is assisting Tamar with the project. James has developed the following checklist containing internal control points that the company should consider in this new implementation:
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Group of answer choices
1.The person in accounts payable should generate the purchase order.
2.The person in accounts payable should generate the receiving ticket once the invoice from the supplier is received.
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4.The responsibilities of generating the purchase order and receiving the inventory should be separated among two different people.
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Chapter 18 Solutions
Auditing And Assurance Services
Ch. 18 - List five asset accounts, three liability...Ch. 18 - Prob. 2DQPCh. 18 - Prob. 3DQPCh. 18 - Prob. 4DQPCh. 18 - Prob. 5DQPCh. 18 - Prob. 6DQPCh. 18 - Prob. 7DQPCh. 18 - Prob. 8DQPCh. 18 - Prob. 9DQPCh. 18 - Prob. 10DQP
Ch. 18 - Prob. 11DQPCh. 18 - Prob. 13DQPCh. 18 - Prob. 14DQPCh. 18 - Prob. 15DQPCh. 18 - Prob. 16.1MCQCh. 18 - Prob. 16.2MCQCh. 18 - Prob. 16.3MCQCh. 18 - Prob. 17.1MCQCh. 18 - Prob. 17.2MCQCh. 18 - Prob. 17.3MCQCh. 18 - Prob. 18.1MCQCh. 18 - Prob. 18.2MCQCh. 18 - Prob. 18.3MCQCh. 18 - Prob. 19DQPCh. 18 - Prob. 20DQPCh. 18 - Prob. 21DQPCh. 18 - Prob. 22DQPCh. 18 - The following misstatements are included in the...Ch. 18 - Prob. 24DQPCh. 18 - Prob. 25DQPCh. 18 - Prob. 26DQPCh. 18 - Prob. 27DQPCh. 18 - Prob. 28DQPCh. 18 - Prob. 30C
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- Imagine that you have been hired to audit the sales and collections of a medium-to-large merchandising company. Suggest at least two ways that management could manipulate earnings and make specific recommendations for the internal control procedure to prevent or detect the transaction.arrow_forwardThe following internal controls for the acquisition and payment cycle were selected from a standard internal control questionnaire. 1. Approved purchase orders are required for all acquisitions of goods. 2. Prenumbered receiving reports are prepared as support for acquisitions and numeri- cally accounted for. 3. Dates on receiving reports are compared with vendors’ invoices before entry into the acquisitions journal. 4. Account classifications are reviewed by someone other than the preparer. 5. All supporting documents are cancelled after checks are signed or electronic funds transfers are approved. 6. The authorized signer compares data on supporting documents with checks and elec- tronic funds transfer authorizations. 7. Vendors’ invoices are recalculated before payment. 8. All checks are signed by the owner or manager. 9. Checks are mailed by the owner or manager or a person under her supervision after signing. .10. The accounts payable master file is updated, balanced, and…arrow_forwardYour firm has recently been appointed as auditor to Danish, a private company that runs a chain of small supermarkets selling fresh and frozen food, and canned and dry food. Danish has very few controls over inventory because the company trusts local managers to make good decisions regarding the purchase, sale and control of inventory, all of which is done locally. What will your objectives in regards to the internal control system of the company? Which steps you will take to evaluate the internal control system of the company?arrow_forward
- Day-to-day internal controls are important for all businesses to maximize the efficient use of resources andprofitability.Your firm has recently been appointed as auditor to Nassy Stores, a private company that runs a chain of smallsupermarkets selling fresh and frozen food, and canned and dry food. Nassy Stores has very few controls overinventory because the company trusts local managers to make good decisions regarding the purchase, sale andcontrol of inventory, all of which is done locally. Pricing is generally performed on a cost-plus basis.Each supermarket has a stand-alone computer system on which monthly accounts are prepared. These accountsare mailed to head office every quarter. There is no integrated inventory control, sale or purchasing system andno regular system for inventory counting. Management accounts are produced twice a year.Trade at the supermarkets has increased in recent years and the number of supermarkets has increased.However, the quality of staff that has been…arrow_forwardQUESTION The acquisition and payments cycle provides plenty of opportunity for employees and management to misappropriate company assets. In addition to controlling the acquisition of goods, the cycle is designed to control the outflow of funds from the business, so any major breaches of control can have serious consequences. The following information relates to Shine (Pty) Ltd, a wholesaler of light fittings and other electrical equipment. The two buying officers negotiate prices with suppliers and place They also follow up on orders to ensure that they are received. When a new supplier is taken on, the buyer sends an internal memo to the creditors administration clerk requesting that the supplier is entered onto the creditors Masterfile. The buyer must notify the administration clerk of the new supplier’s full details including the creditor’s bank details.…arrow_forwardExamples of Deviations. Madison Perry, CPA, is conducting an audit of Parker Inc. In sodoing, Perry is performing a study of Parker’s internal control and has identified a numberof important controls related to purchases on which to rely. These controls are as follows:1. There is segregation of duties between the individual authorizing the purchase, the individual preparing the purchase order, and the individual receiving goods and servicesbeing purchased.2. Verification of approval of purchases is evidenced by having the individuals performingthe verification place their initials on the purchase order.3. On receipt of goods or services, invoices from vendors should be matched to purchaseorders. This matching is evidenced by a handwritten notation of the purchase order number on each invoice.4. Mathematical verification of vendor invoices should be evidenced by having the individuals performing the verification place their initials on the invoice itself.5. Payments should be made only…arrow_forward
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- The following internal controls for the acquisition and payment cycle were selected from a standard internal control questionnaire.1. Approved purchase orders are required for all acquisitions of goods.2. Prenumbered receiving reports are prepared as support for acquisitions and numeri-cally accounted for.3. Dates on receiving reports are compared with vendors’ invoices before entry into theacquisitions journal.4. Account classifications are reviewed by someone other than the preparer.5. All supporting documents are cancelled after checks are signed or electronic fundstransfers are approved.6. The authorized signer compares data on supporting documents with checks and elec-tronic funds transfer authorizations.7. Vendors’ invoices are recalculated before payment.8. All checks are signed by the owner or manager.9. Checks are mailed by the owner or manager or a person under her supervision aftersigning. .10. The accounts payable master file is updated, balanced, and reconciled to the…arrow_forwardThe given system flowchart elaborates the business activities involved in different departments, including (1) Sales Department, (2) Accounting Department, (3) Warehouse, (4) Shipping Department, and (5) Billing Department. The bottom part of this Figure indicates that the Sales Department sends the sales invoice to the Billing Department. Here, it is assumed that this sales invoice only contains non-financial information. What types of frauds are possible in this business environment? (long answers)arrow_forwardShelly Eckert has prepared the following list of statements about internal control. Identify each statement as true or false. Iffalse, indicate how to correct the statement. One of the objectives of internal control is to safeguard assets from employee theft, robbery, and a. unauthorized use. One of the objectives of internal control is to enhance the accuracy and reliability of the accounting b. records. C. No laws require U.S. corporations to maintain an adequate system of internal control. >arrow_forward
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