Get Distinction with Guidance on Accounting Dissertations
1. Audit Procedures for Obtaining Audit Evidence 10.18 Evidence Gathering Techniques. An auditor
Audit Procedures for Obtaining Audit Evidence
10.18 Evidence Gathering Techniques. An auditor obtains audit evidence by one or more of the following evidence gathering techniques: inquiry, observation, inspection, reperformance, recalculation, confirmation, and analytical procedures.
Required :
For each of the evidence gathering technique give an example of a substantive test procedure.
10.19 Inquiry, Analytical Procedures, and Observation. In the examination of financial statements, auditors must judge the validity of the audit evidence they obtain. For the following questions, assume that the auditors have considered internal control and found it satisfactory.
Required :
A. In the course of examination, the auditors ask many questions of client officers and employees.
1 Describe the factors that the auditors should consider in evaluating oral evidence provided by client officers and employees.
2 Discuss the validity and limitations of oral evidence.
B. Analytical procedures include the computation of various balance sheet and operating ratios for comparison to prior years and industry averages. Discuss the validity and limitations of ratio analysis as evidential matter.
C. In connection with an examination of the financial statements of a manufacturing company, the auditors are observing the physical inventory of finished goods, which consists of expensive, highly complex electronic equipment. Discuss the validity and limitations of the audit evidence provided by this procedure.
10.20 Inspection. Discuss what you would accept as satisfactory documentary evidence in support of entries in the following?
A. Sales journal.
B. Sales returns register.
C. Voucher or invoice register. D. Payroll register.
E. Check register.
10.21 Accounts Receivable Confirmations – Positive and Negative. In work on accounts receivable, use of confirmations is of great importance.
A. What is an audit confirmation?
B. What characteristics should an audit confirmation possess if an auditor is to consider it as sufficient appropriate audit evidence?
C. Distinguish between a positive and a negative accounts receivable confirmation.
D. In confirming a client’s accounts receivable, what characteristics should be present in the accounts if the auditor is to use negative confirmations?
10.22 Attendance at Physical Inventory Counting. A processor of frozen foods carries an inventory of finished products consisting of 50 different types of items valued at approximately $2,000,000. About $750,000 of this value represents stock produced by the company and billed to customers prior to the audit date. This stock is being held for the customers at a monthly rental charge until they request shipment and is not separate from the company’s inventory.
The company maintains separate perpetual ledgers at the plant office for both stock owned and stock being held for customers. The cost department also maintains a perpetual record of stock owned. The above perpetual records reflect quantities only.
The company does not take a complete physical inventory at any time during the year, since the temperature in the cold storage facilities is too low to allow one to spend more than 15 minutes inside at a time. It is not considered practical to move items outside or to defreeze the cold storage facilities for the purpose of taking a physical inventory. Because of these circumstances, it is impractical to test count quantities to the extent of completely counting specific items. The company considers as its inventory valuation at year-end the aggregate of the quantities reflected by the perpetual record of stock owned, maintained at the plant office, priced at the lower of cost or market.
Required :
A. What are the two principal problems facing the auditor in the audit of the inventory?
Discuss briefly.
B. Outline the audit steps that you would take to enable you to render an unqualified opinion with respect to the inventory. (You may omit consideration of tests of unit prices and clerical accuracy.)
2. Beech Corporation is a merchandising company that is preparing a master budget for the third quar...
Beech Corporation is a merchandising company that is preparing a master budget for the third quarter of the calendar year. The company’s balance sheet as of June 30th is shown below: Beech Corporation is a merchandising company that is preparing a master budget for the third quarter of the calendar year. The company's balance sheet as of June 30th is shown below: Beech Corporation Balance Sheet June 30 Assets 74,000 Cash Accounts receivable 143,000 73,500 Inventory Plant and equipment, net of depreciation 224,000 514,500 Total assets Liabilities and Stockholders' Equity Accounts payable 85,000 Common stock 310,000 119,500 Retained earnings Total liabilities and stockholders' equity 514,500
3. 81. In the month of August, a firm had total cash receipts of $10,000, total cash disbursements of..
81. In
the month of August, a firm had total cash receipts of $10,000, total cash
disbursements of $8,000, depreciation expense of $1,000, a minimum cash balance
of $3,000, and a beginning cash balance of $500. The excess cash balance
(required financing) for August is
(a) required total financing of $500.
(b) excess
cash balance of $5,500.
(c) excess cash balance of $500.
(d) required
total financing of $2,500.
82. _________
statements are projected financial statements.
(a) Pro forma
(b) Income
(c) Cash
(d) Balance
sheet
83. The
key inputs for preparing pro forma income statements using the simplified
approaches are the
(a) sales forecast for the preceding
year and financial statements for the coming year.
(b) sales
forecast for the coming year and the cash budget for the preceding year.
(c) sales forecast for the coming year
and financial statements for the preceding year.
(d) cash
budget for the coming year and sales forecast for the preceding year.
84. The percent?of?sales method of preparing the
pro forma income statement assumes all costs are
(a) fixed.
(b) constant.
(c) independent.
(d) variable.
85. Under
the judgmental approach for developing a pro forma balance sheet, the “plugâ€
figure required to bring the statement into balance may be called the
(a) cash balance.
(b) retained
earnings.
(c) external financing required.
(d) accounts
receivable.
86. The
_________ method of developing a pro forma income statement forecasts sales and
values for the cost of goods sold, operating expenses, and interest expense
that are expressed as a ratio of projected sales.
(a) percent?of?sales
(b) accrual
(c) judgmental
(d) cash
87. The
best way to adjust for the presence of fixed costs when using the simplified
approach for pro forma income statement preparation is
(a) to proportionately vary the fixed
costs with the change in sales.
(b) to
adjust for projected fixed?asset outlays.
(c) to disproportionately vary the
costs with the change in sales.
(d) to
break the firm’s historical costs into fixed and variable components.
88. The _________ method of developing a pro
forma balance sheet estimates values of certain balance sheet accounts while
others are calculated. In this method, the firm’s external financing is used as
a balancing, or plug, figure.
(a) percent?of?sales
(b) accrual
(c) judgmental
(d) cash
89. A
firm has prepared the coming year’s pro forma balance sheet resulting in a plug
figure in a preliminary statement—called the external financing required—of
$230,000. The firm should prepare to
(a) repurchase common stock totaling
$230,000.
(b) arrange
for a loan of $230,000.
(c) do nothing; the balance sheet
balances.
(d) invest
in marketable securities totaling $230,000.
90. A
firm has prepared the coming year’s pro forma balance sheet resulting in a plug
figure in a preliminary statement—called the external financing required—of
negative $250,000. The firm may prepare to
(a) sell common stock totaling
$250,000.
(b) arrange
for a loan of $250,000.
(c) do nothing; the balance sheet
balances.
(d) invest
in marketable securities totaling $250,000.
4. 1) A grouping of characters into a word, a group of words, or a complete number is called a record..
1) A grouping of characters into a word, a group of words, or a complete number is called a record.
2) Each characteristic or quality describing a particular entity is called an attribute.
3) Program-data dependence refers to the coupling of data stored in files and software programs that use this data such that changes in programs require changes to the data.
4) A DBMS separates the logical and physical views of data.
5) Every record in a file should contain at least one key field.
6) NoSQL technologies are used to manage sets of data that don't require the flexibility of tables and relations.
7) Data governance deals with the policies and processes for managing the integrity and security of data in a firm.
8) Because HTML was designed as a cross-platform language, it is the preferred method of communicating with back-end databases.
9) A data dictionary is a language associated with a database management system that end users and programmers use to manipulate data in the database.
10) In a relational database, complex groupings of data must be streamlined to eliminate awkward many-to-many relationships.
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5. 7. Why should the production requirements set forth in the production budget be carefully...
7. Why should the production requirements set forth in the production budget be carefully coordinated with the sales budget?
8. Why should the timing of direct materials purchases be closely coordinated with the production budget?
9. a. Discuss the purpose of the cash budget.
b. If the cash for the first quarter of the fiscal year indicates excess cash at the end of each of the first two months, how might the excess cash be used?
6. The largest single expense of most merchandising firms is ____. Amortization Expense Rent Expense...
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7. Primare Corporation has provided the following data concerning
Primare Corporation has provided the following data concerning last month’s manufacturing operations.
Required:
1. Prepare a schedule of cost of goods manufactured for the month.
2. Prepare a schedule of cost of goods sold for themonth.
8. A company that wishes to disclose information about the effect of changing prices in accordance with...
A company that wishes to disclose information about the effect of changing prices in accordance with SFAS 89, Financial Accounting and Changing Prices, should report this information in
The body of the financial statements.
The notes to the financial statements.
Supplementary information to the financial statements.
Management’s report to shareholders.
9. Value 2.00 polnts Exercise 14-13 Income statement preparation LOP2 Following are the selected acc...
value 2.00 polnts Exercise 14-13 Income statement preparation LOP2 Following are the selected account balances of Shanta Company Sales 1,250,000 Raw materials inventory, Dec. 31, 2012 37,000 Goods in process inventory, Dec. 31, 2012 53,900 Finished goods inventory, Dec. 31, 2012 62,750 Raw materials purchases 175,600 Direct labor 225,000 Factory computer supplies used 17,840 Indirect labor 47,000 Repairs-Factory equipment 5,250 Rent cost of factory building 57,000 Advertising expense 94,000 General and administrative expenses 129,300 Raw materials inventory, Dec. 31, 2013 42,700 Goods in process inventory, Dec. 31, 2013 41,500 Finished goods inventory, Dec. 31, 2013 67,300 Prepare an income statement for Shanta Company (a manufacturer). Assume t manufactured is $534,390 SHANTA COMPANY Income Statement For Year Ended December 31, 2013 1,250.0 Sales Cost of goods sold 62,750 Finished goods inventory, Dec. 31, 2012 Cost of goods manufactured
10. Which one of the following does not appear on the balance sheet of a manufacturing company? a....
Which one of the following does not appear on the balance sheet of a manufacturing company?
a. Finished goods inventory
b. Work in process inventory
c. Cost of goods manufactured
d. Raw materials inventory
11. 1. Describe the core, actual, and augmented levels of product associated with an automobile. What...
1. Describe the core, actual, and augmented levels of product associated with an automobile. What level does the mobile Wi-Fi system represent? Explain. 2. Debate the pros and cons of including Wi-Fi Internet access in automobiles. Should the Internet access feature be included in automobiles? You ve heard of mobile Wi-Fi hotspots, but one is truly mobile- your car. Automobile manufacturers Audi, Ford, Nissan, and General Motors are equipping cars with 10-inch screens and Internet access. Cadillac s new XTS includes an iPad-like touch screen and voice commands so you can keep in touch with your friends on Facebook. The government is concerned that Web access will cause a spike in accidents due to increased driver distraction and wants the devices to only work when the car is in park. Such guidelines are only suggestions, however, leaving car manufacturers to include whatever they think customers want in their vehicles. The industry s argument is that these new gadgets are safer than the handheld ones drivers are already using in their cars. Automakers claim that there will be even fewer buttons than currently found in cars, possibly resulting in greater safety for drivers and passengers.
12. Normal annual capacity for Smythe Company is 36,000 machine hours, with fixed factory overhead...
Normal annual capacity for Smythe Company is 36,000 machine hours, with fixed factory overhead budgeted as $16,920 and an estimated variable factory overhead rate of $2.10 per hour. During October, actual production required 2,700 machine hours, with a total factory overhead of $7,400. Required: Compute (1) The applied factory overhead and (2) The over- or under applied amount for October.
13. Note: This problem is for the 2018 tax year. On February 12, 2005, Nancy Trout and Delores Lake f...
Note: This problem is for the 2018 tax year. On February 12, 2005, Nancy Trout and Delores Lake formed Kingfisher Corporation to sell fishing tackle. Pertinent information regarding Kingfisher is summarized as follows Kingfisher's business address is 1717 Main Street, Ely, MN 55731; its telephone number is (218) 555-2211; and its e-mail address is kingfisher@kf.com. The employer identification number is 11-1111111, and the principal business activity code is 451110. * Nancy owns 50% of the common stock and is president of the company, and Delores owns 50% of the common stock and is vice president of the company. No other class of stock is authorized Both Nancy and Delores are full-time employees of Kingfisher. Nancy's Social Security number is 123-45-6789, and Delores's Social Security number is 987-65-4321. Kingfisher is an accrual method, calendar year taxpayer. Inventories are determined using FIFO and the lower of cost or market method. Kingfisher uses the straight-line method of deprecation for book purposes and accelerated depreciation (MACRS) for tax purposes During 2018, the corporation distributed cash dividends of $80,000 Kingfisher's financial statements for 2018 are shown below. Income Statement Income Gross sales Sales returns and allowances Net sales $2,408,000 (80,000) $2,328,000