Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 10, Problem 39AOQ
Which of the following represents a correct statement concerning the risk of misappropriation of cash for SSC?
- (1) This is not a major concern because sales are made on credit.
- (2) Deposit of cash into a lockbox system decreases the risk of misappropriation.
- (3) Misappropriation of cash is not a significant problem in a commercial company.
- (4) The success of QSand increases the risk that cash will be misappropriated.
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Can you explain why the uncontrolled risks are risks based in the problem . For instance how is unauthorized vendor purchases a risk in this problem? How is recieveing wrong items or quantities a risk? What part of the problem shows that missappropiation of cash is an uncontrolled risk?
Does the sale of accounts receivable to generate immediate cash harm or mislead anyone? Would you consider it an ethical business activity?
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within the central Arizona area.
a. Which of the following represents a correct statement concerning the risk of misappropriation of cash for SSC?
Multiple Choice
This is not a major concern because sales are made on credit.
Deposit of cash into a lockbox system decreases the risk of misappropriation.
Misappropriation of cash is not a significant problem in a commercial company.
The success of QSand increases the risk that cash will be misappropriated.
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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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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- What is a good response to... 1. Embezzlement can result from: skimming cash, manipulating refunds, or creating fake transactions. It is possible that the coworker could have inflated expenses, recorded false refunds, or pocketed cash from sales without recording them in the system. Another possibility is underreporting sales or voiding transactions and then taking the difference. 2. Using the store’s accounting software, there is the option to analyze transaction logs for unusual activity i.e. high numbers of refunds, voided transactions, or manual adjustments. Cross-checking daily sales reports, register totals, and bank deposits are also another way to identify missing funds. 3. Finding should be reported to the supervisor/store manager and/or loss prevention department. 4. No, I would not confront my coworker as confronting them could jeopardize the investigation and raise tensions with that individual. Instead, I would just relay my finding to management and document when that…arrow_forwardAnswer the following questions about internal control over cash payments:1. Payment by check includes three controls over cash. What are they?2. Suppose a purchasing agent receives the goods that she purchases and also approves payment for those goods. How could a dishonest purchasing agent cheat the company? Howdo companies avoid this internal control weakness?arrow_forwardAnswer the following questions to ponder: 1. What is the purpose of internal controls? 2. What will happen if companies do not impose internal controls? 3. Think of possible controls over cash, receivables and inventories. Explain.arrow_forward
- Consider how an organization must manage cash and receivables. Which of the two is the most important to manage? Is one more susceptible to fraud and errors than the other? Explain your answer. How would a misstatement in each affect an organization?arrow_forwardS1: Bank reconciliation is important because it is an opportunity to check for fraudulent activity and to prevent financial statement errors. S2: Cash set aside for a particular purpose may be classified as current or non-current depending on the purpose for its establishment. S3: A cash short or over account is debited when the petty cash fund proves out short. S4: If there is a bank overdraft, it is necessary to adjust and create a bank overdraft account in the ledger. a. All statements are correct. b. All statements are incorrect. c. Only two statements are correct. d. Only one statement is correct. e. Only one statement is incorrect.arrow_forwardSuppose we collected cash from a charge customer and the debit was to Cash and the credit to Sales. How and when would this error be discovered?arrow_forward
- 1. What does it mean to say that internal control has limitations and what are these limitations? 2. Provide an appropriate response based on the following scenarios. Assume that the accounting clerk posts a customer’s payment for the wrong amount, giving the customer credit for less than he or she actually paid. How will this error be detected? How might this error have been prevented? Assume that the employee who opens the mail steals a customer payment. How will this theft be detected? How might this theft have been prevented? 3. What is petty cash and what purpose(s) does it serve? 4. What types of controls should be in place to make sure people in the office don't just take from petty cash (for their own personal use) whenever they feel like it? In your opinion, what is an appropriate amount to have in petty cash? 5. Prepare the necessary journal entries for each of the following: (a) On March 1, issued a check to establish a petty cash fund of $1,410 (b)…arrow_forwardQUESTION 13 (1) A junior auditor said: "Comparing to other accounts, such as property, plant and equipment and accounts receivable, cash account contains less inherent risk. This is because there is no significant valuation issue with cash." Evaluate the statement and justify your answer (2) Use the fraud triangle to explain why revenue recognition is generally considered as having high fraud risk. [arrow_forward2. After completing a horizontal and vertical analysis of the Balance Sheet and Income Statement. Increases in cash do not match the companies net income. What type of documentation and information should the auditors request to further evaluate for potential fraud? What might explain this increase to cash in relation to Net Income?arrow_forward
- The company is not preparing bank accounts reconciliations. This is an example of: * O Audit risk O Control risk Detection Risk Inherent riskarrow_forwardWhich of the following statements is true? A. Window dressing is a practice of closing the books of accounts at the end of the accounting period for a better financial position and performance. B. Lapping is a transfer of cash from one bank to another bank. C. Kiting consists of misappropriating a collection from one customer and concealing this defalcation when collection is made from another customer. D. The imprest system required that all cash receipts should be deposited intact and all cash payments should be made by means of check.arrow_forwardAccounting 1. The auditor spends significant time auditing cash discounts and sales returns because A. management needs to authorize these transactions. B. these transactions reduce income. C. the materiality is higher. D. the risk of transactions being recorded to conceal stolen cash is higher.arrow_forward
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