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Internal Controls and Substantive Testing
You are the auditor of PC Ltd., a company that produces low cost electronic goods to children and young adults. The audit has a year end of 30th June 2012.
There are four main people involved with the acquisitions of inventory for PC Ltd. Ms Auburn is the purchases officer; Mr Brown is the Accounts Payable Clerk; Mr Crimson is the Financial Controller and Ms Dark is the Payments Officer.
The acquisitions system works as follows:
Required:
a) Identify three controls that operate within this system and state the potential errors they are aimed at preventing.
b) Describe two additional controls (or improvements to controls) that you would implement into this system and why.
c) Describe the substantive tests that you would perform on transactions in the acquisitions cycle of this system to gain adequate assurance over the assertions of completeness, cut off and accuracy.
Fiber Technology, Inc. manufactures glass fibers used in the communications industry. The company's materials and parts manager is currently revising the inventory policy for XL-20, one of the chemicals used in the production process.
Discuss the difference between half-year, mid-quarter, and mid-month conventions. What type of asset falls into each category and why do you think the IRS code has these different categories.
Your CPA firm has just been engaged as the independent auditors for Drotos Theaters. The theater chain is opening a new theater in one month.
Determine whether each of the following transactions is taxable. If a transaction is not taxable, indicate what type of reorganization is affected, if any.
Spacer Company has 2 service departments and two operating departments. Budgeted costs and budgeted activity in the several departments
AFR Company's internal audit function recently completed an audit of the Company's various employee benefit plans. The internal auditors' working papers contain the following audit observation
Prepare the consolidation removal entries
Securitization has allowed banks to originate more loans than they can ultimately finance on their balance sheets.
What cutoff tests are performed for accounts receivable, how are they performed, and to what account audit objectives does the evidence pertain?
What do you see as the primary cause of the auditing problems that led to the Enron scandal? Who do you believe carries the moral responsibility for those failures? Why?
Find the accrued interest earned and find the discounting of note receivable.
A company purchases 300 shares of its $100 par value stock at $110 per share. It then reissues 50 shares at $115 per share. The entry upon re-issuance of the stock would include a
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