CAIN Corp generally has good control policies and activities related to authorization of transactions for accounting entry, and the accounting manual has instructions for recording sales transactions in the proper accounting period. The company regularly closes the accounting process each Friday at 5pm to prepare weekly management reports. The year-end date (cut-off date) is December 31, and this year, December 31 was a Monday. However, the accounting was performed through Friday as usual, and the accounts were closed for the year on January 4. Paper Trail All the entries were properly dated after December 31, including the sales invoices, cash receipts and shipping documents. However, the trial balance from which the financial statements were prepared was dated December 31. Nobody noticed the slip of a few days because the Friday closing was normal. Amount CAIN reported sales of P672,000 and gross profit of P268,800 over the January 1-4 period. Cash collections on customers’ accounts were recorded in the amount of P800,000. Required: Identify the ff. You as an auditor audit objective controls test of controls audit of balance

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Situation 

CAIN Corp generally has good control policies and activities related to authorization of transactions for accounting entry, and the accounting manual has instructions for recording sales transactions in the proper accounting period.  The company regularly closes the accounting process each Friday at 5pm to prepare weekly management reports. The year-end date (cut-off date) is December 31, and this year, December 31 was a Monday.  However, the accounting was performed through Friday as usual, and the accounts were closed for the year on January 4. 

Paper Trail 

All the entries were properly dated after December 31, including the sales invoices, cash receipts and shipping documents.  However, the trial balance from which the financial statements were prepared was dated December 31. Nobody noticed the slip of a few days because the Friday closing was normal. 

Amount 

CAIN reported sales of P672,000 and gross profit of P268,800 over the January 1-4 period. Cash collections on customers’ accounts were recorded in the amount of P800,000. 

Required: 

Identify the ff.

You as an auditor

  1. audit objective
  2. controls
  3. test of controls
  4. audit of balance
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