Wally’s Billboard & Sign Supply
Questions 4, 5, 6, 7, & 8
(4) 1. Obtain cutoff bank statements – Cutoff and Completeness (AU-C 315.A114 a ii & IV) 2. Obtain copies of client’s bank reconciliations.
a. Test the mathematical accuracy of every bank reconciliation – Accuracy (AU-C 315.A114 a-iii)
b. Trace the line item “Balance per Bank Statement” – Accuracy and Existence (AU-C 315.A114 a-iii, b-i)
c. Trace the check number and amount of outstanding items – Occurrence, Completeness, & Accuracy (AU-C 315.A114 a.i-iii)
d. Trace the date, check number, and amount of outstanding item – Occurrence & Completeness. (AU-C 315.A114 a.i-ii)
e. Trace the amount of any deposits in transit – Cutoff,
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The assertions that are relevant to line item two are existence, accuracy, and possibly cutoff. Existence (AU-C 315.A114 b.i) because Wally’s wants the bank to confirm that the asset of cash is in fact still in the account. Accuracy (AU-C 315.A114 a.iii) because Wally’s wants the bank to confirm the amount in the account so that they can accurately reflects the balance in their system. Cutoff (AU-C 315.A114 a.ii), because Wally’s is asking for confirmation at year end, December 31st.
(7) If I knew the risk for fraud in the cash account was relatively high I would first test the internal controls of Wally’s. I would look at segregation of duties with respect to handling cash. Who is handling cash coming in? Who is confirming cash drops? Who is depositing the cash? Who is sending cash out? It would also be beneficial to look at all confirmations and signatures regarding cash. I would test each internal control and determine if Management implements these controls. It would also be beneficial to determine the tone at the top regarding their pressure on management and/or staff.
If I thought fraud in the cash account was relatively high I would research the industry that Wally’s was in and become familiar with the type of transactions are common, and the cash flows. If I am able to familiarize myself with common transactions in the industry then I will more likely be able to catch something that
a. According to the bank statement, how many checks were written from this account during the statement period? (0.5 points)
a. According to the bank statement, how many checks were written from this account during the statement period? (0.5 points)
* Documents used: customer order, sales order, shipping document, sales invoice, sales journal, remittance advice, bank deposit list, cash receipts jornal, credit memo, sales return and allowance journal, uncollectable account authorization form, a/r master file, a/r trail balance, monthly statement
This control is directly related to the accuracy transaction-related audit objective for sales. The auditor might test the effectiveness of this control by examining a sample of duplicate sales invoices for the clerk’s initials indicating that the unit selling price was verified.
The process requires Peyton Approved to discover how much inventory is sold and what the cost of goods will result in. The process requires the business to review three forms of merchandise inventory to determine which summary benefits the business’s operational behavior. One will discover when assuming that first inventory purchased by the store is the first to be sold, it is determined that the FIFO method displays the best financial outcome for the business. During the process of updating journal entries, one must enter the information proved appropriately into the T-accounts to add the balance under each record. Once the T-accounts for transactions and adjusted transactions are balanced, the next step is to enter the information provided on the balance sheet. The balance sheet will list Peyton Approved assets, liabilities and stockholders equity after added during the T-account process (Nobles, 2014). Once the balance sheet is completed the income statement, statement of retained earnings, and closing entries can be filled with the information proved. This will give the business a full review from journal entry to closing entries of the business for the six month accounting
a. According to the bank statement, how many checks were written from this account during the statement period? (0.5 points)
Sales invoices are prepared in batches on a daily basis using numbered sales invoices. Sales invoice numbers are automatically generated by the company’s computer system. The accounts receivable clerk does not have appropriate computer rights to override the computer-generated invoice number. Upon preparing sales invoices, the accounts receivable clerk verifies that the first invoice number of the batch is consistent with the last invoice number of the previous batch. Inconsistencies or skipped sales invoice numbers are investigated and resolved before new sales invoices are prepared. The items shipped are compared to the items billed for proper quantity, price, and other sales order terms.
7. Prepare the 3 financial statements for the year ended June 30, 2013 (multi step income statement, classified balance sheet, and statement of retained earnings). Even though you are preparing a multi-step income statement, you still need to list the various expenses individually on the income statement for consideration of full credit. These 3 statements must be typed. Also you must include appropriate dollar signs and appropriate underlines and correct formatting for the statements to receive full credit.
assertion of existence and completeness for cash, this procedure is beyond the scope of this case and is not required
‘Cash and cash equivalents’ include certain short-term investments and, in some cases, bank overdrafts. Like IFRS, ‘cash and cash equivalents’ include certain shortterm investments, although not necessarily the same short-term investments as under IFRS. Unlike IFRS, bank overdrafts are considered a form of short-term financing, with changes therein classified as financing activities. The statement of cash flows presents cash flows during the period, classified by operating, investing and financing activities. Like IFRS, the statement of cash flows presents cash flows during the period, classified by operating, investing and financing activities. The separate components of a single transaction are classified as operating, investing or financing. Unlike IFRS, cash receipts and payments with attributes of more than one class of cash flows are classified based on the predominant source of the cash flows unless the underlying transaction is accounted for as having different components. Cash flows from operating activities may be presented using either the direct method or the indirect method. If the direct method is used, then an entity presents a reconciliation of profit or loss to net cash flows from operating activities; however, in our experience practice varies regarding the measure of profit or loss used. Like IFRS, cash flows from operating activities may be presented using either the direct method or the indirect method. Like IFRS, if
Question 3: Describe and show the journal entries illustrating how the company accounts for the transfer of its accounts receivable to financial institutions. Is this accounting treatment reasonable? What are the key assumptions made under this approach? Do you agree with these assumptions?
Name: ________________________________ Date: _________________ [1]BASIC BANK01 - BAT 003 Which of the following statements is true? A. An asset account is increased by a credit B. An expense account is increase by a credit C. A revenue account is decreased by a credit D. An equity account is decreased by a debit [2]BASIC BANK02 - BAT 010 The Income Summary account contains: A. Total revenues and total expenses for the year B. Total assets and total liabilities at year end C. Total revenues, expenses, assets, and liabilities
3) Prepare common-sized financial statements for USSC for the period 1979-1981. Also compute key liquidity, solvency, activity, and profitability ratios for 1980 and 1981. Given these data, identify what you believe were the high-risk financial statement items for the 1981 USSC audit.
The total Accounts Receivable balance in the records of $4,752,257.70 was verified by setting a filter of
Trace items returned to the receiving report, taking note of quantity and date received (S‑4).