Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
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Chapter 26, Problem 23DQP
To determine
Discuss and explain the deficiencies and recommendations in purchasing department of Company L.
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One of your Firm’s Managers, Colin Cronen is responsible for the auditing the financial statements of the Roman Corporation, which has a batch-processing IT-based system for shipping and invoicing that it purchased from a software vendor. The following comments have been extracted from Cronen’s notes on IT operations and the processing and control of shipping notices and customer invoices. Each type of computer run is assigned to a specific employee who is responsible for making program changes, running the program, and answering questions. This procedure has the advantage of eliminating the need for records of IT operations because each employee is responsible for his or her own computer runs. At least one IT department employee remains in the computer room during office hours, and only IT department employees have keys to the computer room. The corporation considered the desirability of program controls but decided to retain the manual controls in place prior to the conversion to the…
Paul Williams recently joined XYZ2 Limited as the head of the accounting department. Williams spent the first few weeks analysing the account information system. Based on this analysis, Williams is concerned about the purchase system of XYZ2 Limited. Here are the details of the purchase system.
The purchasing agent of XYZ2 Limited periodically checks inventory levels from a computer terminal connected to a central accounting system. The agent searches the inventory file for items that need to be ordered. He then selects a supplier, prints a hard copy of the purchase order, and mails it to the vendor. The clerk files one copy of the PO in the department and sends a second copy to the AP Clerk. When the inventories arrive at the receiving department, a receiving clerk reconciles the items with the packing slip, inspects them for condition, and manually prepares a three-part receiving report. The clerk sends one copy to the purchasing department to close out the open PO, files one copy…
Chapter 26 Solutions
Auditing And Assurance Services
Ch. 26 - Prob. 1RQCh. 26 - Prob. 2RQCh. 26 - Prob. 3RQCh. 26 - Prob. 4RQCh. 26 - Prob. 5RQCh. 26 - Prob. 6RQCh. 26 - Prob. 7RQCh. 26 - Prob. 8RQCh. 26 - Prob. 9RQCh. 26 - Prob. 10RQ
Ch. 26 - Prob. 11RQCh. 26 - Prob. 12RQCh. 26 - Prob. 13RQCh. 26 - Prob. 14RQCh. 26 - Prob. 15.1MCQCh. 26 - Prob. 15.2MCQCh. 26 - Prob. 15.3MCQCh. 26 - Prob. 16.1MCQCh. 26 - Prob. 16.2MCQCh. 26 - Prob. 16.3MCQCh. 26 - Prob. 17.1MCQCh. 26 - Prob. 17.2MCQCh. 26 - Prob. 17.3MCQCh. 26 - Prob. 18.1MCQCh. 26 - Prob. 18.2MCQCh. 26 - Prob. 18.3MCQCh. 26 - Prob. 19DQPCh. 26 - Prob. 20DQPCh. 26 - Prob. 21DQPCh. 26 - Prob. 22DQPCh. 26 - Prob. 23DQPCh. 26 - Prob. 24DQP
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- During your first audit of medium-size manufacturing company, the owner, John Bell, explains that in order to establish clear-cut lines of responsibility for various aspects of the business, he has made the following assignments: One employee is responsible for the purchasing, receiving, and storing of merchandise. A second employee has full responsibility for maintenance of accounts receivable records and collections from customers. A third employee is responsible for personnel records, timekeeping, preparation of payrolls, and distribution of payroll checks. Bell asks your opinion concerning this plan of organization. Instructions: Explain fully the reasons supporting your opinion on each assignment. If the assignment violates an internal control principle, describe the principle and how to correct the violation. 1. One employee is responsible for the purchasing, receiving, and storing of merchandise. 2: A second employee has full responsibility for maintenance of accounts receivable…arrow_forwardLajod Company has an internal audit department consisting of a manager and three staff auditors. The manager of internal audits, in turn,reports to the corporate controller. Copies of audit reports are routinely sent to the auditcommittee of the board of directors as well as to the corporate controller and the individualresponsible for the area or activity being audited.The manager of internal audits is aware that the external auditors have relied on theinternal audit function to a substantial degree in the past. However, in recent months,the external auditors have suggested there may be a problem related to the objectivity ofthe internal audit function. This objectivity problem may result in more extensive testingand analysis by the external auditors.The external auditors are concerned about the amount of nonaudit work performedby the internal audit department. The percentage of nonaudit work performed by theinternal auditors in recent years has increased to about 25% of their total…arrow_forwardThe management of Swan Limited, has engaged you to review internal control over purchase,receipt, storage and issue of materials. You have prepared the following comments that describesSwan’s procedures.Raw materials, which consist mainly of high cost electronic components, are kept in a lockedstore room. The store room personnel include a supervisor and four clerks. All are well trained,competent and adequately bonded. Raw materials are removed from the storeroom only uponwritten or oral authorization of one of the production supervisors.There are no perpetual inventory records; hence, the storeroom clerks do not keep records ofgoods received or issued. To compensate for the lack of perpetual records, a physical inventorycount is taken monthly by the store room clerks who are well supervised. Appropriate proceduresare followed in making the inventory count.After the physical count, the store room supervisor matches the quantity counted againstpredetermined reorder levels. If the…arrow_forward
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