Reference no: EM132378630

Question

It is the end of your client's financial year. You have started checking and fully reconciling all of the accounts. After running a profit and loss report and comparing to the previous year, it appears that profits are considerably higher than last year. You have had a chat with the client, who is surprised with your findings because there is not much money in the bank and they have not taken very much money out of the business.

What might be causing the profits to be overstated?

a) Credit-card expenses have been coded directly to a chart of account code instead of marking a supplier bill as paid.

b) Deposits have been coded directly to income accounts instead of Sales Receipts.

c) Sales Receipts have been entered instead of using "Receive Payments."

d) Supplier bills have been entered against an expense account code instead of an item to track inventory.