...Module 3 1.In going through the plan it is my observation that the plan lacks in testing some areas, specifically the sales revenue and accounts receivable. Via info from the previous module we know there is no pre numbering for bills of lading and no other method to which these are accounted for. There are several things that could result from this weakness. We can conclude that there may be discrepancies in items shipped and items billed to customers. As well because of a lack of numerical reference, sampling can have a lack of effectiveness. () 2 & 3. (Refer to Attached Excel Document) 4. Upon analyzing the sampling results, it could be said that when it comes to cases of missing bills of lading there is significant evidence provided to conclude that because of the outlying beyond the allowable deviation, there has to be an unallowable amount of billings without shipment. I think these results would lead a skeptical auditor to conclude that there is possible inflation of earnings via conjured up sales recordings. () Module 4 1.The objective of performing this test is to determine if the factory equipment accounts are materially unstable or overstated from misclassification of certain items pertaining to regular maintenance. The unit being sampled here would be the all of the amounts debited to the factory equipment accounts (ie. the dollar amount). The population would be the total debits of $12,600,000, this is what is left after ($89860000-$772600000). By...
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...Solutions for the Biltrite Bicycles Inc. Case Module I - Assessment of Inherent Risk..............................................................3 Module II – PRELIMINARY ASSESSMENT OF CONTROL RISK BASED ON AN UNDERSTANDING OF THE DESIGN OF CONTROLS ................17 Module III - Control Testing: Sales Processing................................................29 Module IV - PPS Sampling: Factory Equipment Additions............................31 Module V - Accounts Receivable Aging Analysis..............................................35 Module VI - Sales and Purchases Cutoff Tests..................................................42 Module VII - Search for Unrecorded Liabilities...............................................47 Module VIII - Dallas Dollar Bank Reconciliation.............................................49 Module IX- Analysis of Interbank Transfers....................................................52 Module X - Analysis of Marketable Securities..................................................54 Module XI - Plant Asset Additions and Disposals.............................................57 Module XII - Estimated Liability for Product Warranty.................................61 Module XIII - Mortgage Note Payable and Note Payable to Bank Two.........63 Module XIV - Working Trial Balance................................................................66 Module XV - Audit Report..................................................................................80 ...
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...BILTRITE BICYCLES INC. CASE STUDY 2 MODULE II 1. Biltrite’s strengths and weaknesses in the internal control Assertion Sale Processing Flowchart: Weakness A. The office was uninformed about the credit approval - Valuation B. Missing customer information and product validation - Valuation C. Invoices were mailed before shipping the goods - Existence And does not matched with bill of lading D. Bill of ladings are not pre numbered - Completeness Strength Good internal control for receivables aging analysis and Follow up of delinquent accounts. Cash Receipts Processing Flowchart: Weakness E. Unrestricted customer check endorsement - Valuation F. Unable to edit and apply discounts and correct net amount - Valuation Purchases and Accounts Payable: Weakness G. Need approval for the prepared voucher for proper -Valuation Account distribution Strengths H. Verifies details on goods received with the receiving report I. Matching control tape with purchase summary for the processed invoices Payment Processing Flowchart: Strengths J. Matching the checks with the documents, amount and remittance details K. Checks are reviewed before signing for approval. L. Cancelled checks/documents to avoid duplication. M. Mailed check directly to vendors after signing the checks. Biltrite’s strengths and weaknesses in the internal control Assertion Payroll Processing Flowchart: Weakness ...
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