Auditing Problem-Inventories & Cost of Goods Sold

You have been engaged by the management of Alden, Inc., to review its controls over the purchase, receipt, storage, and issue of raw materials. You have prepared the following comments, which describe Alden’s procedures. 1) Raw materials, which consist mainly of high-cost electronic components, are kept in a locked storeroom. Storeroom personnel include a supervisor and four clerks. All are well trained, competent, and adequately bounded. Raw materials are removed from the storeroom only upon written or authorization of one of the production supervisors. 2) There are no perpetual-inventory records; hence, the storeroom clerks do not keep records of goods received or issued. To compensate... click for more

Auditing Problems - Property, plant, and equipment: Depreciation and Depletion

Nova Land Development Corporation is a closely held corporation engaged in purchasing large tracts of land, subdividing the tracts, and installing paved streets and utilities. The Corporation does not construct buildings for the buyers of the land and does not have any affiliated construction companies. Undeveloped land usually is leased for farming until the corporation is ready to begin developing it. The Corporation finances its land acquisitions by mortgages; the mortgagees require audited financial statements. This is your first audit of the company, and you have now begun the audit of the financial statements for the year ended December 31. Required: The Corporation has three tra... click for more

Auditing problems (Accounts Payable and other liabilities)

In the course of your initial audit of the financial statements of Sylvan Company, you determine that of the substantial amount of accounts payable outstanding at the close of the period, approximately 75% is owed to six creditors. You have requested that you be permitted to confirm the balances owing to these six creditors by communicating with the creditors, but the president of the company is unwilling to approve your request on the grounds that correspondence in regard to the balances – all of which contain some overdue items –might give rise to demands on the part of the creditors for immediate payment of the overdue items-might give rise to demands on the part of the creditors for imme... click for more

Auditing Questions (1-5)

Please answer only if you are sure you are correct...thank you! 1. Immediately upon receipt of cash, a responsible employee should a. Record the amount in the cash receipts journal. b. Prepare a remittance listing. c. Update the subsidiary accounts receivable records. d. Prepare a deposit slip in triplicate. 2. Upon receipt of customers’ checks in the mail room, a responsible employee should prepare a remittance listing that is forwarded to the cashier. A copy of the listing should be sent to the a. Internal auditor to investigate the listing for unusual transactions. b. Treasurer to compare the listing with the monthly bank statement. c. Accounts receivable bookkeeper to ... click for more

Auditing Questions (6-10)

6. Which of the following would not overstate current period net income? a. Capitalizing an expenditure that should be expensed. b. Failing to record a liability for an expenditure. c. Failing to record a check paying an item in Vouchers Payable. d. All of the above would overstate net income. 7. A client’s purchasing system ends with the recording of a liability and its eventual payment. Which of the following best describes the auditor’s primary concern with respect to liabilities resulting from the purchasing system? a. Accounts payable are not materially understated. b. Authority to incur liabilities is restricted to one designated person. c. Acquisition of materials is n... click for more