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Auditing 402

In: Business and Management

Submitted By Campbellja
Words 787
Pages 4
Auditing 402
March 5, 2013
Week 9- Week 11 Homework Assignments
15-26
A. Effective audit procedure for testing whether shipments have been billed is a sample of warehouse removal slip should be selected. It should be examined to see whether it has the proper sales invoice attach or not. So the sampling unit for the audit procedure will be warehouse removal slip.
B. Using attribute sampling method if the auditor is willing to accept the TER of 4% and at ARACR of 5% without exception in the sample size would be 75 as determined from table 8.9
C. Design of random selection plan from population:
Population size of ware house removal slips = 34,687-11,741 =22,946 Sample size determined in b = 75 Interval = Population sized Sample sized determined = 22,946 75 =305
Sample will be 11878, 12183, 12488, 12793, and 13908

23-24 1. Evaluate the details of the cash recipts journal entries with the details of the daily deposit slips. Lapping indicated a cover up of cash deficiency. 2. Arrange a bank transfer schedule. This way the auditor is able to verify the transactions. 3. Compare the details of the cash receipts journal entries with the details of the corresponding daily deposit slips. 4. Count the balance in petty cash at the year end and also examine invoices, receipts, and other supporting documents related with reimbursement of petty cash. 5. Prepare a bank transfer schedule. 6. Agree gross amount on payroll checks to approved hours and pay rates and examine payroll checks clearing after year-end with the payroll journal. 7. Obtain the cutoff statement and compare the cleared checks to the year-end reconciliation. 21-24 1. Verify the correct cost of inventory recorded in the inventory invoice. 2. Examine the last shipment records and sales invoice of succeeding year. 3. Perform tests for count of inventory and verify the records made by the person in charge. Also verify the warehouse records during the year. 4. Application of pre number tags 5. Examine the appropriate unit price of raw materials in the mater file with perpetual records. 6. Make sufficient classification of obsolete inventory. 7. Verification of control over the manufacturing overhead costs with view of manufacturing overhead rate.
B. 1. Examine the vendor invoice to assess the appropriateness of cost 2. Verify shipments records 3. Examine perpetual inventory master file and tests quantity of inventory at year end. 4. Review inventory tags included in the physical assessment. 5. Examine the perpetual records and check inventory valuation and compare with master file records. 6. Test of physical count and obsolete inventory items. 7. Assessment of manufacturing overhead costs and manufacturing overhead rate applied to inventory.
22-25
1. (1) Notes payable to be obtained from the client, foot them in the list and traceit to the general ledger. This is done to determine if the notes payable reconciles with the general ledger. 2. Verify the notes payable on the list properly recorded and disclosed 3. This audit is done to verify all recorded notes payable. 4. Determine whether interest expense is properly recorded on the books, 5. Audit procedure 2 was not necessary as procedure 3 and procedure2 both have same function. 6. Analyze interest expenses and send a confirmation for notes payable to all payees who not receive a confirmation for notes payable to all payees who did not receive a confirmation for notes. 7. Confirmation of balance in notes payable to payees in the last year’s notes payable. 8. Examine the notes paid after year end to determine whether they were liabilities as the balance sheet date 9. Review the minutes in the board of directors meeting.
4-25
1. Rule 101 of AICPA Code of conduct rules
2. Janes should have imposed sufficient safeguards to protect her from the impairments of independence.
3. If she does not accept she has violated rule 101 of AICPA code of conduct rules
4. Jane should give a firm no to the clients when being pressured to receive gifts.
5-22
1. No, Hanover will not be held responsible to the purchaser of the common stock. It is possible when the suit is brought under Rule 10b-5 of Securities Exchange Act 1934 because there was not intent to deceive by the auditor.
2. Hanover was familiar with the purpose of the audit that the financial statements were to be used to get finance from first National Bank. Therefore he will be held responsible for failure to apply due care to the bank. The bank will also be liable as a third party.
3. The trade creditors will not be successful in their claim because they were not a prime beneficiary.

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