An anonymous source advised Canada Revenue Agency (CRA) that Jim Mayers, owner of Mayers Grocery Store, has been filing fraudulent tax returns for the past several years. You, a tax auditor with the CRA, are in the process of auditing Mayers Grocery Store for the year ended December 31, 2020. The tax returns for the past five years show a decreasing value for ending inventory. You have performed a quick survey of the large store and the attached warehouse and observed that both seemed very well stocked.Entim the anonymous tip? What would youdo to constrm or deny yoursuspcion

An anonymous source advised Canada Revenue Agency (CRA) that Jim Mayers, owner of Mayers Grocery Store, has been filing fraudulent tax returns for the past several years. You, a tax auditor with the CRA, are in the process of auditing Mayers Grocery Store for the year ended December 31, 2020. The tax returns for the past five years show a decreasing value for ending inventory. You have performed a quick survey of the large store and the attached warehouse and observed that both seemed very well stocked.Entim the anonymous tip? What would youdo to constrm or deny yoursuspcion

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

A client operates two plants. In Plant A, throughout the entire cutoff test window, all sales have been recorded as FOB shipping point. In Plant B, all sales have been recorded as FOB shipping point in the cutoff window prior to year-end and either FOB shipping point or FOB destination in the cutoff window subsequent to year end. Which plant would an auditor judge to have higher fraud risk? Question 27 options: Plant A would have higher fraudulent financial reporting risk than Plant B. Plant B would have higher risk of the misappropriation of assets than Plant A. Plant A would have higher risk of the misappropriation of assets than Plant B. Plant B would have higher fraudulent financial reporting risk than Plant A.
After Bill and Mercedes' tax return was selected for audit, Bill read on the Internet speculation that filing a paper tax return (instead of filing electronically) and extending a tax return deadline decrease the chance of IRS audit. Bill has convinced Mercedes that they need to use these strategies in the future and look for other ways to avoid audit. Questions for discussion include: 1. What are the timing requirements for filing a tax return and paying taxes owed? 2. Does Bill's action likely violate any IRS regulation? 3. If Bill's action does not violate IRS rules, it is ethical? Please make sure to respond to other students' discussion answers, especially if they have a different point of view than yours.
You are auditing the accounts receivable for Conor Company as of December 31, 2021. One of your procedures was to send positive confirmations to a sample of 50 accounts. Of those 50 confirmations, 40 have been positively confirmed without comments, 7 had minor differences that have been cleared satisfactorily. Two of the responses had the following comments: a. “We never received these goods.” b. “The balance of $1,000 was paid on December 15, 2021.” For each of these comments, identify the steps that you would take to clear (resolve) them.
A local bank began charging $3.40 each month for returning canceled checks. The bank also has an $8.10 "maintenance" fee if a checking account slips below $750.00. Donna Sands likes to have copies of her canceled checks for preparing her income tax returns. She has received her bank statement with a balance of $603.73. Donna received $4.88 in interest and has been charged for the canceled checks and the maintenance fee. The following checks were outstanding: Number 94, $133.49, Number 96, $111.40, Number 98, $212.28; and Number 99, $82.30. A deposit of $777.15 was not recorded on Donna's bank statement. Her checkbook shows a balance of $848.03. Prepare Donna's bank reconciliation. Note: Input all amounts as positive values. Round your answers to 2 decimal places. Donna's checkbook balance Add: Subtotal Deduct Subtotal Reconciled balance BANK RECONCILIATION Bank balance Add Subtotal Deduct. Reconciled balance
David H. Brooks, a university graduate with an accounting degree and the former CEO of DHBIndustries, Inc., was charged in October 2007 with accounting and securities fraud for failing toreport the company’s inventory at the lower of cost or market. From 2001 to 2005, DHB purchasedlarge quantities of a material called Zylon and used it in making bulletproof vests that were sold tothe U.S. military and local law enforcement agencies. During this same period, DHB learned thatZylon deteriorated rapidly when exposed to light, heat, and body perspiration. DHB knew that oneof its competitors, Second Chance Body Armor, had stopped using Zylon in its vests and, eventually, discontinued its business because customer demand for its Zylon-based vests had evaporated.DHB did not write down its own inventory of Zylon and Zylon-based vests because it had a largecontract to supply the U.S. military with bulletproof vests. In its financial statements for the yearended December 31, 2004, DHB reported…
Black is a Certified Fraud Examiner for the ABC Company. Green, an employee in the accounting department, steals $40,000 worth of merchandise from the store’s warehoused. If Green’s cas is eventually referred to the police by Black, they will probably charge Green with: A. Breach of contract. B. Breach of fiduciary duty. C. Embezzlement. D. Larceny.
208.Lily, an auditor for a major retail company, suspects that inventory fraud is occurring at three stores which have high costs of goods sold. Which of the following audit activities would provide the most persuasive evidence that fraud is occurring? Group of answer choices Use an integrated test facility (ITF) to compare individual sales transactions with test transactions submitted through the ITF and investigate all differences. Select a sample of individual store prices and compare them with the sales entered on the cash register for the same items. Interview the three individual store managers to determine if their explanations about the observed differences are the same, and then compare their explanations to that of the section manager. Schedule a surprise inventory audit to include a physical inventory and investigate areas of inventory shrinkage.
See photo
Jackson balanced his Debtors Control Account on 30 September 2005 and it showed a debit balance of $16,300. He checked this balance with the individual debtors' balance in the Debtors Ledger which shows a debit balance of $14,750. When he examined the records, the following errors were found: (i) Goods costing $1,200 had been sold to Summer on credit but the transaction was totally omitted from the books. (ii) Spring was allowed cash discount of $50. This amount was entered correctly in the Cash Book but was recorded on the wrong side of his account. (iii) The Sales Returns Journal showed that a credit note for $200 had been sent to Winter but it had not been posted to Winter's account. (iv) Bad debts written off $1,500 had been recorded in the Sales Ledger but no entry was made in the General Ledger. (v) Autumn's debit balance of $350 had been omitted from the Debtors Ledger balance. You are required to prepare: (a) an adjusted Debtors Control Account; (b) a statement to reconcile the…
Susan Small, CPA has Medium Corporation as an audit client. Medium has asked Small to create and install a new computerized payroll system. Because Small does not have the appropriate level of expertise, she referred Medium to Compusystems, Inc., a local software consulting company. Small has an arrangement where she is paid ten percent of any fee received by Compusystems from her referrals. Small has disclosed this to her client. Required: The situation above involves a possible violation of the AICPA's Code of Professional Conduct. State the rule in question and explain why or why not there is a violation of the code. You need not refer to the rule number, but should clearly describe the rule in question.
Wares king supplies custom-fitted curtains and blinds to retail customers. It has recently expanded to offer a wide variety of home decorating products through its six stores across the state. After some initial problems with stock control it installed a new automated inventory system in April this year. The system replaced another automated system that had been modified so often over the years that the auditor had advised Wares's management that they did not regard it as reliable. That is, the auditor was unable to rely on the old system sufficiently to assess control risk for inventory as anything less than high. Required: a) Explain the normal process an auditor would expect to find in the client's systems governing changes to computer programs. Why is an auditor concerned about program changes? b) Wares kings financial year-end is 31 December. Does the auditor need to obtain evidence about the performance of the inventory control system from every month in the year or from a sample…
Jones is suspected of carrying out a fraud while working for his employer. Jones has worked for the employer for several years. The fraud is suspected to have begun in 2013 and possibly continued in 2014. As part of the investigation, the following financial information has been collected concerning Jones.In 2012, Jones was able to document he had $800 cash on hand and $1725 in a checking account. He also had a student loan on which he owed $8000.In 2013, Jones paid off his student loan. He also purchased a new car for $22,000. During the same year he purchased a condominium priced at $128,000. He placed $38,000 down and financed the remainder with a non-interest mortgage of $90,000. In addition, Jones had documented expenses of $12,000 for 2013 and according to his W-2 earned $55,000 in net wages. He has a zero balance in his bank account at year-end, no cash on hand, and made no known mortgage payments.During 2014 Jones had no cash on hand but $5,000 in his banking account. He…