Answered: The financial records of the Movitz…

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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As an auditor for the CPA firm of Hinkson and Calvert, you encounter the following situations in auditing different dients. 1 2. No. Prepare the journal entries for each of the situations above. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation M I 1. Oriole Company is a closely held corporation whose stock is not publicly traded. On December 5, the corporation acquired land by issuing 4,500 shares of its $20 par value common stock. The owners' asking price for the land was $134,000, and the fair value of the land was $118,000. 2 Sunland Company is a publicly held corporation whose common stock is traded on the securities markets. On June 1, it acquired land by issuing 19,000 shares of its $10 par value stock. At the time of the exchange, the land was advertised for sale at $271,000. The stock was selling at $11…
The expense cycle offers employees many opportunities to commit fraudin processing cash purchases and cash disbursements. Buyers usually becomeeasy targets for suppliers who offer large returns if willing to transactmore. Analytical procedures are a cost-effective means of identifying accounts in the expense cycle that are misstated.a. Please list some of the analytical procedures the auditor may use forestimate the likelihood of misstatement and explain the significance of the audit?b. Why a trade payable turnover day analysis provides a more precise analysis of debteffort rather than current ratio?c. Why do auditors pay more attention to debt understatement than debt overstatement?d. Please identify the elements of environmental control that are relevant toinitiation and recording of purchases?
Read the case. Then answer the questions based on it. BACKGROUND: Audit standards indicate that there is a presumption that auditors will confirm accounts receivable unless the balance is immaterial, confirmations are deemed ineffective, or the auditors' assessment of risk is low and other procedures will achieve the same objective. However, these instances are considered few and far between and current trends in auditing indicate that there is an expectation that accounts receivable will be confirmed. Auditors may stratify the population, use haphazard or judgmental sampling, and send positive or negative requests. Jenner & Jenner CPAs are the auditors for the Leno Company. In reviewing the accounts receivable aging, the auditors learn that there is a high number of accounts with balances, there are some very large and very small balances, and many customers' balances consist of multiple invoices. 2. How should the auditors mitigate the risk associated with both very large and…

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