Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Question
Chapter 9, Problem 41OQ
a.
To determine
Calculate the planned assessed level of control risk.
b.
To determine
Calculate the appropriate
c.
To determine
Estimate the achieved upper deviation rate and suggest the assessed level of control risk for the given circumstances.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
You have been asked to test the effectiveness of Ingo Corporation controls of manually approving all purchases over $25,000. During the year, Ingo Corporation has made 1,000,000 purchases of which 3,000 were over $25000. Jian Zhang, CPA, your supervisor, asked you to use a tolerable deviation rate of 4% (although she expects the rate to be only appropriately 0.25 percent) and a 5 percent risk of assessing control risk too low.What is the planned level of control risk?
You are an audit supervisor of Ali & Babs partnersand you are planning the audit of Little Angel Corporation, a listed company, for the year ending 31 March 2020. The company manufactures computer components and forecast profit before tax is GH¢33·6m and total assets are GH¢79·3m.Little Angel Corporationdistributes its products through wholesalers as well as via its own website. The website was upgraded during the year at a cost of GH¢1·1m. Additionally, the company entered into a transaction in February to purchase a new warehouse which will cost GH¢3·2m. Little Angel Corporation’s legal advisers are working to ensure that the legal process will be completed by the year end. The company issued $5m of irredeemable preference shares to finance the warehouse purchase. During the year the financedirector has increased the useful economic lives of fixtures and fittings from three to four years as he felt this was a more appropriate period. The finance director has informed the…
You are an audit supervisor of Ali & Babs partners and you are planning the audit of Little Angel Corporation, a listed company, for the year ending 31 March 2020. The company manufactures computer components and forecast profit before tax is GH¢33·6m and total assets are GH¢79·3m.Little Angel Corporation distributes its products through wholesalers as well as via its own website. The website was upgraded during the year at a cost of GH¢1·1m. Additionally, the company entered into a transaction in February to purchase a new warehouse which will cost GH¢3·2m. Little Angel Corporation’s legal advisers are working to ensure that the legal process will be completed by the year end. The company issued $5m of irredeemable preference shares to finance the warehouse purchase.During the year the finance director has increased the useful economic lives of fixtures and fittings from three to four years as he felt this was a more appropriate period. The finance director has informed the…
Chapter 9 Solutions
Principles Of Auditing & Other Assurance Services
Ch. 9 - Prob. 1RQCh. 9 - Prob. 2RQCh. 9 - Prob. 3RQCh. 9 - Prob. 4RQCh. 9 - Prob. 5RQCh. 9 - Prob. 6RQCh. 9 - Prob. 7RQCh. 9 - Prob. 8RQCh. 9 - Prob. 9RQCh. 9 - Prob. 10RQ
Ch. 9 - Prob. 11RQCh. 9 - Prob. 12RQCh. 9 - What is a dual-purpose test?Ch. 9 - Prob. 14RQCh. 9 - Prob. 15RQCh. 9 - Prob. 16RQCh. 9 - What would be the difference between an attributes...Ch. 9 - Prob. 18RQCh. 9 - Prob. 19RQCh. 9 - Prob. 20RQCh. 9 - Prob. 21RQCh. 9 - Prob. 22RQCh. 9 - Prob. 23RQCh. 9 - Prob. 24RQCh. 9 - Prob. 25RQCh. 9 - Prob. 26RQCh. 9 - Prob. 27RQCh. 9 - Prob. 28RQCh. 9 - Prob. 29QRACh. 9 - Prob. 30QRACh. 9 - Prob. 31QRACh. 9 - Prob. 32QRACh. 9 - Prob. 33QRACh. 9 - Prob. 34QRACh. 9 - Prob. 35QRACh. 9 - Prob. 36QRACh. 9 - Prob. 37AOQCh. 9 - Prob. 37BOQCh. 9 - Prob. 37COQCh. 9 - Prob. 37DOQCh. 9 - Prob. 37EOQCh. 9 - Prob. 37FOQCh. 9 - Prob. 37GOQCh. 9 - Prob. 37HOQCh. 9 - Prob. 37IOQCh. 9 - Prob. 37JOQCh. 9 - Prob. 37KOQCh. 9 - Prob. 37LOQCh. 9 - Prob. 38OQCh. 9 - Prob. 39OQCh. 9 - For each term in the first column below, identify...Ch. 9 - Prob. 41OQCh. 9 - Smith, Inc. Rachel Robertson wishes to use...Ch. 9 - Prob. 43OQCh. 9 - Prob. 44PCh. 9 - Prob. 45PCh. 9 - Prob. 46PCh. 9 - Prob. 47PCh. 9 - In the audit of Potomac Mills, the auditors wish...Ch. 9 - Prob. 49PCh. 9 - Prob. 50PCh. 9 - Prob. 51PCh. 9 - Prob. 52ITC
Knowledge Booster
Similar questions
- A CPA’s client, Boos & Baumkirchner, Inc., is a medium-sizemanufacturer of products for the leisure-time activities market (camping equipment,scuba gear, bows and arrows, and so forth). During the past year, a computer system wasinstalled and inventory records of finished goods and parts were converted to computerprocessing. The inventory master file is maintained on a disk. Each record of the filecontains the following information:• Item or part number • Total value of inventory on hand at cost• Description • Date of last sale or usage• Size • Quantity used or sold this year• Unit-of-measure code • Economic order quantity• Quantity on hand • Code number of major vendor• Cost per unit • Code number of secondary vendorIn preparation for year-end inventory, the client has two identical sets of preprintedinventory count cards. One set is for the client’s inventory counts, and the other is for theCPA’s use to make audit test counts. The following information is on each card:• Item or…arrow_forwardConsider the following independent situations, each of which applies to an audit of a client for the year ending 30th June 2019. XYZ Ltd is a large machinery manufacturer that uses business-to business e-commerce to transmit purchase orders to its many suppliers. Each supplier electronically transmits an invoice, which is credited directly to the accounts payable file. The goods usually take one or two weeks to arrive. Once they have been received, a goods received notes is raised by XYZ and matched with the supplier’s invoice, and payment is authorised. Spiral Ltd’s credit officer, whose prime responsibility was setting and reviewing customers’ credit limits, retired during the year. The position has remained unfilled for six months, as no suitably qualified and experienced replacement has yet not been found. Kent Ltd failed to discover an employee fraud on a timely basis because bank reconciliations were not being done each month. Required: For each of the above situations: What…arrow_forwardYou are auditing the accounts receivable for Conor Company as of December 31, 2022 One of your procedures was to send positive confirmations to a sample of 50 accounts. Of those 50 confirmations, 40 have been positively confirmed without comments, 7 had minor differences that have been cleared satisfactorily. The remaining 3 had the following comments: “We received $6,000 of goods on consignment on November 20, 2022. We have not sold them yet.” “We received these goods on January 5, 2023 and mailed a check on January 7, 2023.” “The balance of $2,000 was paid on December 10, 2022.” For each of these comments, identify the steps that you would take to clear (resolve) them.arrow_forward
- As you are planning the annual audit of Norton Corporation, you note that the company has a number of user operated computers in use in various locations. One of the machines has been installed in the stores department, which has the responsibility for disbursing stock items and for maintaining stores records. In your audit, you find that one employee receives the requisitions for stores, disburses the stock, maintains the records, operates the computer, and authorizes adjustments to the total amounts of stock recorded by the computer. When you discuss the applicable controls with the department manager, you are told that the user operated computer is assigned exclusively to that department. Therefore, the manager contends that it does not require the same types of controls applicable to large IT systems. a. Comment on the manager’s contention.arrow_forwardYou have worked with Zaird & Associates, CPAs, for a little more than a year and are beginning your second audit of Universal Air (UA). This year you even have an assistant reporting to you—Jane McClain. Jane has come to you with a concern. She noticed that when sales are “booked” over the Internet by credit charge, an entry is made debiting cash (from the credit card) and crediting air traffic liability. When the scheduled flight occurs, UA recognizes the revenue from the ticket. If a ticket is canceled on the Internet, the only entry made is to a database that maintains specific flight information on seat availability. Jane has discovered that customers are e-mailed a “Canceled Reservation” form when this occurs, but no accounting journal entry is recorded, and no refund occurs until the customer requests (in writing) a refund. If the customer never requests the refund, a credit to the individual’s credit card account is never issued; when they do not get refunds on their credit…arrow_forwardYou have worked with Zaird & Associates, CPAs, for a little more than a year and are beginning your second audit of Universal Air (UA). This year you even have an assistant reporting to you—Jane McClain. Jane has come to you with a concern. She noticed that when sales are “booked” over the Internet by credit charge, an entry is made debiting cash (from the credit card) and crediting air traffic liability. When the scheduled flight occurs, UA recognizes the revenue from the ticket. If a ticket is canceled on the Internet, the only entry made is to a database that maintains specific flight information on seat availability. Jane has discovered that customers are e-mailed a “Canceled Reservation” form when this occurs, but no accounting journal entry is recorded, and no refund occurs until the customer requests (in writing) a refund. If the customer never requests the refund, a credit to the individual’s credit card account is never issued; when they do not get refunds on their credit…arrow_forward
- As you are planning the annual audit of Norton Corporation, you note at the company has a number of user operated computers in use in various locations. One of the machines has been installed in the stores department, which has the responsibility for disbursing stock items and for maintaining stores records. In your audit, you find that one employee receives the requisitions for stores, disburses the stock, maintains the records, operates the computer, and authorizes adjustments to the total amounts of stock recorded by the computer. When you discuss the applicable controls with the department manager, you are told that the user operated computer is assigned exclusively to that department. Therefore, the manager contends that it does not require the same types of controls applicable to large IT systems. b. Discuss five types of control that would apply to this microcomputer application.arrow_forwardFor the audit of Carbald Supply Company, CaroleWever, CPA, is conducting a test of sales for 9 months of the year ended December 31,2013. Included among her audit procedures are the following:1. Foot and cross-foot the sales journal and trace the balance to the general ledger.2. Review all sales transactions for reasonableness.3. Select a sample of recorded sales from the sales journal and trace the customername and amounts to duplicate sales invoices and the related shipping document.4. Select a sample of shipping document numbers and perform the following tests:a. Trace the shipping document to the related duplicate sales invoice.b. Examine the duplicate sales invoice to determine whether copies of the shippingdocument, shipping order, and customer order are attached.c. Examine the shipping order for an authorized credit approval.d. Examine the duplicate sales invoice for an indication of internal verificationof quantity, price, extensions, footings, and trace the balance to the…arrow_forwardIn the audit process, the following data were obtained from the books of Feel na Feel, Inc., which uses a voucher system. All invoices are subject to terms 2/10, n/30, and are entered net with the discount entered in Purchase Discounts column of the voucher register. The accountant in charge of the books went on leave to attend to his family based in New Jersey. A fresh accountancy graduate has been assigned to record the transactions. At year-end, the substitute accountant finds that the unpaid vouchers do not agree with the Vouchers Payable control account. You are called to adjust the matter.A schedule of unpaid vouchers as of December 31, 20x1, all of which are net of discount, is presented to you.Date Voucher No. Supplier AmountNov. 27 896 Balentong Traders P78,400Dec. 2 909 Shala Company 19,60011 918 Mukasim Dealers 44,10020 952 Boom Panes, Inc. 17,15021 955 Edi Wow Company 22,05022 968 Neknek Company 80,85031 982 Bebot, Inc. 78,400P340,550Vouchers Payable (Control Account)Cash…arrow_forward
- Taylor, a CPA, has been engaged to audit the financial statements of University Books, Incorporated. University Books maintains a large cash fund exclusively for the purpose of buying used books from students for cash. The cash fund is active all year because the nearby university offers a large variety of courses with varying starting and completion dates throughout the year. Receipts are prepared for each purchase. Reimbursement vouchers periodically are submitted to replenish the fund. Required:Construct an internal control questionnaire to be used in evaluating the internal control over University Books’ repurchasing process using the revolving cash fund. The internal control questionnaire should elicit a yes or no response to each question. Do not discuss the internal controls over books that are purchased from publishers.arrow_forwardA division of your company purchased a large quantity of new desktop computers during the current fiscal year. An internal audit manager has asked you to audit the process used to acquire the computers. He also wants you to determine whether the computers have been used properly and accounted for correctly. The manager specified a set of audit objectives to guide your tests. For example, he wants you to determine whether: (1) The purchases of the computers were properly authorized. (2) Responsibilities regarding the computers were properly segregated. (3) The computers, as well as the software and information they contain, are properly safeguarded. Consider both physical and logical access。 (4) Laws and regulations regarding software usage have been complied with. (5) The computers recorded as being purchased actually exist. (6) All of the computers that were purchased have been recorded. (7) The amounts at which the computers are recorded are correct. (8) The estimated useful lives…arrow_forwardVarious Completion Matters. For each of the following independent situations, describe the most appropriate course of action that the auditors should take.a. Drew Allison is conducting the audit of Anderson Inc. as of December 31, 2017. At the beginning of the evidence gathering, Allison becomes aware that one of Anderson’s major customers (Jones) is experiencing significant financial difficulties. Jones normally accounts for 5 percent of Anderson’s net sales. After performing the necessary procedures, Allison believes that $2.8 million of Jones’s receivable balance will ultimately become uncollectible. Allison further believes this amount is material to Anderson’s financial condition and results of operations.b. Nagan Carmelo is completing the December 31, 2017, audit of Nugget Company. As part of the final procedures, Carmelo has requested representations from Nugget’s management regarding their assertion as to the fairness of the financial statements and other important matters…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education