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If a company’s control risk is assessed as low, the auditor needs to gather evidence on the operating effectiveness of the controls.
a. For each of the following control activities, indicate the audit procedure the auditor would use to determine its operating effectiveness.b. Briefly describe how substantive tests of account balances should be modified if the auditor finds that the control procedure is not working as planned. In doing so, indicate (a) what could happen because of the control deficiency, and (b) how the auditor’s tests should be expanded to test for the potential misstatement.1. Credit approval by the credit department is required before salespersons accept orders of more than $15,000 and for all customers who have a past-due balance higher than $22,000.2. All merchandise receipts are recorded on pre numbered receiving slips. The controller’s department periodically accounts for the numerical sequence of the receiving slips.3. Payments for goods received are made only by the accounts payable department on receipt of a vendor invoice, which is then matched for prices and quantities with approved purchase orders and receiving slips.4. The accounts receivable bookkeeper is not allowed to issue credit memos or to approve the write-off of accounts.5. Cash receipts are opened by a mail clerk, who prepares remittances to send to accounts receivable for recording. The clerk prepares a daily deposit slip, which is sent to the controller. Deposits are made daily by the controller.6. Employees are added to the payroll master file by the payroll department only after receiving a written authorization from the personnel department.7. The only individuals who have access to the payroll master file are the payroll department head and the payroll clerk responsible for maintaining the payroll file. Access to the file is controlled by computer passwords.8. Edit tests built into the computerized payroll program prohibit the processing of weekly payroll hours in excess of 53 and the payment to an employee for more than three different job classifications during a one-week period.9. Credit memos are issued to customers only on the receipt of merchandise or the approval of the sales department for adjustments.10. A salesperson cannot approve a sales return or price adjustment that exceeds 6% of the cumulative sales for the year for any one customer. The divisional sales manager must approve any subsequent approvals of adjustments for such a customer.
If the bond were not convertible, it would be priced to yield 8 percent. The conversion ratio on the bond is 25 and the stock is currently selling for $43 per share. What is the minimum value of this bond?
Patience, Inc., just paid a dividend of $3.15 per share on its stock. The dividends are expected to grow at a constant rate of 6.00 percent per year, indefinitely. Assume investors require an 11 percent return on this stock.
Financial ratio analysis is conducted by three main groups of analysts: credit analysts, stock analysts, and managers. What is the primary emphasis of each group, and how would that emphasis affect the ratios they focus on?
Given the information below, compute the expected return, variance, and standard deviation of the following company.
The firms marginal tax rate is 40%. What will the cash flows for this project be during year 3?
Drawing on literature, critically evaluate all these hedging techniques. Illustrate your arguments with appropriate examples / cases / empirical studies review.
Respond to the following statement: "Countries with large and efficient financial systems will generally achieve higher rates of economic growth than will countries with smaller,
Ezekial Distribution Corporation has calculated its December 31, 2007 inventory on a FIFO basis at $250,000. The following data pertains to that inventory:
Zoro Corporation has a beta of 2.0. The risk-free rate of interest is 5%, and the return on the stock market overall is expected to be 13%. What is the required rate of return on Zoro stock?
What advantages might a socialist system have in responding to the needs of people struck by an emergency situation like the earthquake that occurred in Haiti in January, 2010?
Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.
It uses a pure residual policy with all distributions in the form of dividends (35% of the $12.8 million investment is financed with debt). Round your answer to the nearest dollar.
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