Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Question
Chapter 10, Problem 32QRA
To determine
Explain the propriety of adjusting the cash balance and accounts payable by the indicated amount of outstanding checks.
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During the preparation of the bank reconciliation for Building Concepts Co., Joel Knolls, the assistant controller, discovered that Lone Peak National Bank incorrectly recorded a $3,290 check written by Building Concepts Co. as $329. Joel has decided not to notify the bank but wait for the bank to detect the error. Joel plans to record the $2,961 error as Other Income if the bank fails to detect the error within the next three months.Discuss whether Joel is behaving in a professional manner.
Situation:
Your assistant shows you the working paper that she has prepared. Your review of your assistant's work reveals that the dollar amounts of all the items in her working paper are correct. You learn that the accountant for Reliable Auto Part, Inc. makes no journal entries for the bank service charges or note collections until the month following the bank's recording of the item. In addition, Reliable's accountant makes no journal entries whatsoever for NSF checks that are redeposited and cleared. (see image)
Question:
(a) Can you help me prepare a corrected four-column proof of cash as of April 30, 20x0. (b) Please include solutions and/or adjusting entries.
During the preparation of the bank reconciliation for Building Concepts Co., Joel Kimmel, the assistant controller, discovered that Lone Peak National Bank incorrectly recorded a $3,290 check written by Building Concepts Co. as $329. Joel has decided not to notify the bank but wait for the bank to detect the error. Joel plans to record the $2,961 error as Other Income if the bank fails to detect the error within the next three months.
Discuss whether Joel is behaving in a professional manner.
Chapter 10 Solutions
Principles Of Auditing & Other Assurance Services
Ch. 10 - Prob. 1RQCh. 10 - Prob. 2RQCh. 10 - Prob. 3RQCh. 10 - Prob. 4RQCh. 10 - Prob. 5RQCh. 10 - Prob. 6RQCh. 10 - Prob. 7RQCh. 10 - Prob. 8RQCh. 10 - Prob. 9RQCh. 10 - Prob. 10RQ
Ch. 10 - Prepare an example of lapping of cash receipts,...Ch. 10 - Prob. 12RQCh. 10 - Prob. 13RQCh. 10 - Prob. 14RQCh. 10 - Prob. 15RQCh. 10 - Prob. 16RQCh. 10 - Explain two procedures by which auditors may...Ch. 10 - Prob. 18RQCh. 10 - Prob. 19RQCh. 10 - Prob. 20RQCh. 10 - Prob. 21RQCh. 10 - Prob. 22RQCh. 10 - Prob. 23RQCh. 10 - Prob. 24RQCh. 10 - Prob. 25RQCh. 10 - Prob. 26QRACh. 10 - Henry Mills is responsible for preparing checks,...Ch. 10 - During the first few months of the year, John...Ch. 10 - Prob. 29QRACh. 10 - Prob. 30QRACh. 10 - Prob. 31QRACh. 10 - Prob. 32QRACh. 10 - Prob. 33QRACh. 10 - Prob. 34QRACh. 10 - Prob. 35QRACh. 10 - Prob. 36QRACh. 10 - Prob. 37QRACh. 10 - Select the best answer for each of the following...Ch. 10 - Prob. 38BOQCh. 10 - Prob. 38COQCh. 10 - Prob. 38DOQCh. 10 - Prob. 38EOQCh. 10 - Prob. 38FOQCh. 10 - Reconciliation of the bank account should not be...Ch. 10 - The auditors suspect that a clients cashier is...Ch. 10 - Prob. 38IOQCh. 10 - Prob. 38JOQCh. 10 - Prob. 38KOQCh. 10 - Prob. 38LOQCh. 10 - Which of the following represents a correct...Ch. 10 - Which of the following correctly identifies a risk...Ch. 10 - Which of the following correctly identifies a risk...Ch. 10 - Prob. 39DOQCh. 10 - Prob. 39EOQCh. 10 - Prob. 39FOQCh. 10 - Prob. 40OQCh. 10 - Prob. 41OQCh. 10 - Prob. 42OQCh. 10 - Prob. 43OQCh. 10 - Prob. 44OQCh. 10 - Prob. 45OQCh. 10 - Prob. 46PCh. 10 - Prob. 47PCh. 10 - Prob. 48PCh. 10 - Prob. 49PCh. 10 - Prob. 50ITCCh. 10 - Prob. 51ITCCh. 10 - Prob. 52RDCCh. 10 - Prob. 53EC
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- During the preparation of the bank reconciliation for The Image Co., Chris Renees, the assistant controller,discovered that Empire National Bank incorrectly recorded a $936 check written by The Image Co. as $396. Chris has decided not to notify the bank but wait for the bank to detect the error. Chris plans to record the $540 error as Other Income if the bank fails to detect the error within the next three months. Determine whether Chris is behaving in a professional manner.arrow_forwardYou are auditing the accounts receivable for Conor Company as of December 31, 2021. One of your procedures was to send positive confirmations to a sample of 50 accounts. Of those 50 confirmations, 40 have been positively confirmed without comments, 7 had minor differences that have been cleared satisfactorily. Two of the responses had the following comments: a. “We never received these goods.” b. “The balance of $1,000 was paid on December 15, 2021.” For each of these comments, identify the steps that you would take to clear (resolve) them.arrow_forwardDuring the preparation of the bank reconciliation for Apache Grading Co., Sarah Ferrari, the assistant controller, discovered that Rocky Spring Bank incorrectly recorded a $610 check written by Apache Grading Co. as $160. Sarah has decided not to notify the bank but wait for the bank to detect the error. Sarah plans to record the $450 error as Other Income if the bank fails to detect the error within the next three months. Discuss whether Sarah is behaving in a professional manner.arrow_forward
- You're the senior auditor-in-charge of the July 31, 20x0, audit of reliable Auto Part, Inc. Your newly hired staff assistant reports to you that she is unable to complete the four-column proof of cash for the month of April 20x0, which you instructed her to do as part of the consideration of internal control over cash. Your assistant shows you the working paper that she has prepared. Your review of your assistant's work reveals that the dollar amounts of all the items in her working paper are correct. You learn that the accountant for Reliable Auto Part, Inc. makes no journal entries for the bank service charges or note collections until the month following the bank's recording of the item. In addition, Reliable's accountant makes no journal entries whatsoever for NSF checks that are redeposited and cleared. Your assistant's working paper appears below. (refer to the image; those are same, it is quite blurry) Required:Prepare a corrected four-column proof of cash in good form for…arrow_forwardRequired: A. Prepare a working paper comparing (1) the total of all checks returned by the bank or still outstanding with (2) the total per clients records of checks outstanding at December 31 plus checks issued from January 1-14. B. Suggest a four possible explanations for the situation disclosed in the working paper. State what action you would take in each case, including any adjustments entry would you propose.arrow_forwardDuring the preparation of a bank reconciliation, the assistant controller discovered that the Bank incorrectly recorded a $3290 check as $329. The controller has decided not to notify the bank but wait for the bank to detect the error. The controller plans to record the $2961 error as "Other Income" if the Bank fails to detect the error within the next three months. Please discuss whether the controller is behaving in an ethical manner. How are cash equivalents reported in the financial statements? Please list two examples of cash equivalents.arrow_forward
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