Whether Wayne’s testing has obtained sufficient appropriate evidence for the relevant assertions (where appropriate) pertaining to Bowden Ltd. Bowden Ltd Next up, Wayne tells you about Bowden Ltd, a small manufacturer of confectionary goods. Wayne has indicated that he has completed testing on accounts payable, sales and related expenses and has performed the following tests: Wayne selected 30 invoices to test the control that the sales assistant verifies that sales prices agree with the approved price list. He found 3 instances where the sales assistant had not placed her signature in the correct box on the invoice verifying that this check took place. The sales manager told Wayne that the sales assistant verifies the prices match, but sometimes forgets to sign the box. As the prices on all the invoices agreed with the authorised price list, Wayne concluded that the control was operating satisfactorily. As part of his work on subsequent events, Wayne noted that there were many returns in July of a product called SugarHit! As this product only went to market in May 2021 and represented only 2.5% of sales for the year, Wayne concluded that the amount was immaterial and no further work was necessary. Advertising expenses for 2021 are material, although only 47% of 2020’s advertising expenses. Wayne selected a substantial sample of entries and vouched them to supporting documents. Wayne found no errors and concluded that advertising expenses were fairly stated. As part of the audit of payables, Wayne carried out a search for unrecorded liabilities. He tested a sample of 20 payments made after 30 June, 2021 and found 3 instances of electronic funds transfers (eft’s) that related to services provided in June, which had not been accrued. However, as the total of the 3 eft’s was immaterial, he concluded that no adjustment was required for unrecorded liabilities.

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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Whether Wayne’s testing has obtained sufficient appropriate evidence for the relevant assertions (where appropriate) pertaining to Bowden Ltd.

Bowden Ltd

Next up, Wayne tells you about Bowden Ltd, a small manufacturer of confectionary goods. Wayne has indicated that he has completed testing on accounts payable, sales and related expenses and has performed the following tests:

Wayne selected 30 invoices to test the control that the sales assistant verifies that sales prices agree with the approved price list. He found 3 instances where the sales assistant had not placed her signature in the correct box on the invoice verifying that this check took place. The sales manager told Wayne that the sales assistant verifies the prices match, but sometimes forgets to sign the box. As the prices on all the invoices agreed with the authorised price list, Wayne concluded that the control was operating satisfactorily.
As part of his work on subsequent events, Wayne noted that there were many returns in July of a product called SugarHit! As this product only went to market in May 2021 and represented only 2.5% of sales for the year, Wayne concluded that the amount was immaterial and no further work was necessary.
Advertising expenses for 2021 are material, although only 47% of 2020’s advertising expenses. Wayne selected a substantial sample of entries and vouched them to supporting documents. Wayne found no errors and concluded that advertising expenses were fairly stated.
As part of the audit of payables, Wayne carried out a search for unrecorded liabilities. He tested a sample of 20 payments made after 30 June, 2021 and found 3 instances of electronic funds transfers (eft’s) that related to services provided in June, which had not been accrued. However, as the total of the 3 eft’s was immaterial, he concluded that no adjustment was required for unrecorded liabilities.

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