Reference no: EM132556078

Question - GB Shaw Manufacturing had the following omissions or errors in their accounting records:

1. A sales invoice was wrongly totalled because of a miss-keyed figure; the invoice was therefore overstated by $1,500

2. A sale was unintentionally recorded twice: once on 29 March then again on 31 March; the amount was a material amount

3. The mail clerk, when opening the mail, pocketed cash sent in by a debtor (customer/accounts receivable)

4. A company typist received and made a pre-listing of cash received during the lunch hour from several debtors, then handed it to the clerk responsible for recording cash receipts and accounts receivable (who stole it and destroyed the pre-list).

5. A shipment of goods sent to a customer was not invoiced (billed) to that customer, as the shipping document was lost.

6. Another shipment of goods sent to a customer was not invoiced (billed), as the bill of lading was not prepared (invoices are prepared from copies of the bill of lading).

7. A sale of surplus spare parts was unintentionally classified as a commercial sale by the data input operator.

8. The company records sales of goods through the company's website when the online orders are received from customers.

Required -

(a) Identify whether each misstatement is an error or fraud.

(b) For each item above, state a control that should have been implemented to prevent the error/fraud.

(c) For each item above, state a substantive audit procedure that could uncover it.

a. error

b. Internal verification of invoice preparation and posting by an independent person. (e.g. Examine batch controls for evidence of internal check).

c. Test clerical accuracy of sales invoices or re-perform batch control procedures.