During your first audit of medium-sizemanufacturing company, the owner, John Bell,explains that in order to establish clear-cut lines ofresponsibility for various aspects of the business,he has made the following assignments: Oneemployee is responsible for the purchasing,receiving, and storing of merchandise. A secondemployee has full responsibility for maintenanceof accounts receivable records and collectionsfrom customers. A third employee is responsiblefor personnel records, timekeeping, preparationof payrolls, and distribution of payroll checks. Bellasks your opinion concerning this plan oforganization.Instructions: Explain fully the reasons supportingyour opinion on each assignment. If theassignment violates an internal control principle,describe the principle and how to correct theviolation.1. One employee is responsible for thepurchasing, receiving, and storing ofmerchandise.2: A second employee has full responsibility formaintenance of accounts receivable records andcollections from customers.3: A third employee is responsible for personnelrecords, timekeeping, preparation of payrolls, anddistribution of payroll checks.

Audit Risk Audit risk is the likelihood that an auditor may provide a financial statement with major…

During your first audit of medium-size manufacturing company, the owner, John Bell, explains that in order to establish clear-cut line: responsibility for various aspects of the busines he has made the following assignments: One employee is responsible for the purchasing, receiving, and storing of merchandise. A secon

During your first audit of medium-size manufacturing company, the owner, John Bell, explains that in order to establish clear-cut line: responsibility for various aspects of the busines he has made the following assignments: One employee is responsible for the purchasing, receiving, and storing of merchandise. A secon

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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Concept explainers

Audit Procedures

Audit Procedures are methods and techniques performed by the auditor to determine the quality of financial information of clients, thereby expressing an opinion on true & fair view of financial statements and entity position. They are identified and applied at the planning stage of audit after determining audit objectives, scope, approach, and risk assessment.

Question

During your first audit of medium-size
manufacturing company, the owner, John Bell,
explains that in order to establish clear-cut lines of
responsibility for various aspects of the business,
he has made the following assignments: One
employee is responsible for the purchasing,
receiving, and storing of merchandise. A second
employee has full responsibility for maintenance
of accounts receivable records and collections
from customers. A third employee is responsible
for personnel records, timekeeping, preparation
of payrolls, and distribution of payroll checks. Bell
asks your opinion concerning this plan of
organization.
Instructions: Explain fully the reasons supporting
your opinion on each assignment. If the
assignment violates an internal control principle,
describe the principle and how to correct the
violation.
1. One employee is responsible for the
purchasing, receiving, and storing of
merchandise.
2: A second employee has full responsibility for
maintenance of accounts receivable records and
collections from customers.
3: A third employee is responsible for personnel
records, timekeeping, preparation of payrolls, and
distribution of payroll checks.

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