As auditor of the Star Manufacturing Company, you have obtained a trial balance taken from the books of Star one month before year-end: Cash in Bank87,000Mortgages Payable(400,000)Trade Accounts Receivable345,000Capital Stock(300,000)Notes Receivable125,000Retained Earnings(510,000)Inventories317,000Sales(3,130,000)Land66,000Cost of Sales2,300,000Buildings, net350,000General and administrative exp622,000Furniture, Fixtures, and equipment, net325,000Legal and professional fees3,000Trade Accts payable(235,000)Interest Exp35,000 .6-10 Full Alternative TextThere are no inventories consigned either in or out.All notes receivable are due from outsiders and held by Star.RequiredWhich accounts should be confirmed with outside sources? Briefly describe from whom they should be confirmed and the information that should be confirmed. Organize your answer in the following format:*Account NameFrom Whom ConfirmedInformation to Be Confirmed

Name: As auditor of the Star Manufacturing Company, you have obtained a tria
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Description: As auditor of the Star Manufacturing Company, you have obtained a trial balance taken from the books of Star one month before year-end: Cash in Bank87,000Mortgages Payable(400,000)Trade Accounts Receivable345,000Capital Stock(300,000)Notes Receivabl

Solution: Audit Evidence are the written proofs collected by the auditors during the audit process. audit evidence is gathered to reduce audit risk. Since financial statements are prepared by management based on a series of assertions, the auditors must obtain sufficient appropriate audit evidence about each financial statement assertion to assess the risk of material misstatement and to restrict the detection risk. This is adopted by the Certified Public Accountants (CPA) so that they can ensure that the company right information about the activities that have been reported in its financial statements.Account Name From Whom Confirmed Information to Be Confirmed Cash in Bank Cash transactions made during the year confirmed by responsible person who make entry of all transactions. Information of the bank like name and type of the bank, The amount deposited in the account, Balance of account at the end date of the year, Name of account, Information of withdrawal of cash, interest rates. Trade accounts receivable To confirm the trade account receivable confirmed by verifying a sample account. Confirmation is response/reply or acknowledgement about to the request. Confirmation show in unconstructive form. The confirmations disclose information is correct form. Personal information of the debtor, Account number, the confirmation for specific date, Invoice balance with invoice date Notes receivable The notes receivable account confirmed by selecting a sample account. Written off balance confirmed with the help of sample account. Information of debtor, Interest rate, Due dates, Balance at the year-end date, Date of interest payments. Inventories The inventory account confirmed by custodian of warehouse. Auditor confirms the balance of inventory with the help of warehousing reports and conducting proper inquires. Information of warehouse transactions, the inventory balance at specific date, Detail list of inventory Trade accounts payable The trade accounts payable verifying transactions with the help of suppliers and responsible person who records transaction of trade accounts payable. A statement of vendor’s account with the client as of the balance sheet date is an alternative to accounts payable confirmation letter. Information of supplier in supplier letter, Amount of purchases at the balance sheet date, Any changes made in the confirmation. Mortgages payable Mortgage payable account confirmed by mortgagee. Balance amount at the balance sheet date, Mortgage loan type, Interest rates, Type of mortgage back security, Balance of periodic payments made, mortgage loan. Capital stock The capital stock records confirmed by agents and registrar. Total Number of shares, Issued shares, Number of authorized shares, Call on shares. Legal fees Legal fees account confirmed with legal professional like-lawyer, attorney letter issued by authorized legal person. Specific legal charges, if any, Type of fees, Opinion of attorney, Special arrangements made in attorney letter. Sales and expenses accounts The sales and expenses account confirmed by external parties. 1. Information of sales invoice 2. Transaction of sales journal and ledger. 3. Balance of Sales tax paid.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Which accounts should be confirmed with outside sources? Briefly describe from whom they should be confirmed and the information that should be confirmed. Organize your answer in the following format:*

Account Name	From Whom Confirmed	Information to Be Confirmed

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Cash in Bank	87,000	Mortgages Payable	(400,000)
Trade Accounts Receivable	345,000	Capital Stock	(300,000)
Notes Receivable	125,000	Retained Earnings	(510,000)
Inventories	317,000	Sales	(3,130,000)
Land	66,000	Cost of Sales	2,300,000
Buildings, net	350,000	General and administrative exp	622,000
Furniture, Fixtures, and equipment, net	325,000	Legal and professional fees	3,000
Trade Accts payable	(235,000)	Interest Exp	35,000