Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
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Chapter 12, Problem 14RQ
To determine
Suggest the measures for the auditing of the satisfactory year-end physical inventory.
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You are assigned to do the audit the work for Howard Ltd for the calendar year 2019, you found some issues that you believe represent possible adjustments to the company’s books. In addition, there are other issues that need to be addressed. The matters include:
Several credit memos that were processed and recorded after year-end relate to sales and account receivables for 2019. These total $42 000.
Electricity and other utilities’ invoices received after the cut-off date $30,000
Inventory cut-off tests indicate that $35 000 of inventory received on 30 December 2019 was recorded as purchases and accounts payable in 2020. These items were included in the inventory count at year-end and were therefore included in ending inventory.
On 15 December 2019, Howard Ltd declared a bonus issue of 2 000 shares with a par value of $100 000 of its ordinary shares, payable 25 January 2020 to the ordinary shareholders on record as in 30 December 2019.
Howard Ltd has not established a reserve for…
The auditors of Final Victory Ltd (FVL) have conducted an annual audit of the company after 31 December 2020, the accounting year end of the company. Up to 31 January 2021 (before the authorization date of the financial statements), two errors are discovered:
i) inventories to the value of $9,750 that had been recognized as sold during 2019 was incorrectly included in inventories as at 31 December 2019.
ii) money receipt from a customer with a value of $5,250 on 31 December 2019 for service to be delivered on 2 January 2020 was recognized as a revenue in 2019.
The following financial statements of FVL for 2019 (as reported) and 2020 (draft) are available:
Statements of Profit or Loss and Other Comprehensive Income for the year ended 31 December
(Picture Following)
The tax rate was 30% for 2019 and 2020. No dividends have been declared or paid.
FVL has no items of other comprehensive income since the date of incorporation.
Required: Prepare the extracts on statement of changes in…
In reviewing of subsequent events, you learned of heavy damage to the client’s warehouse due to a fire occurred after year-end. The loss will partly be reimbursed by insurance. The newspaper described the event in detail. The client made adjustment to related inventories and buildings to reflect the loss.
All facts are the same as situation 1, but the client did not make adjustment to year end figure of inventory.
During the course of examination on your audit client, you suspect that a material amount of assets has been misappropriated through fraud. Management refuses to allow you to investigate further to confirm the suspicions.
The client’s financing arrangements expired and the amount outstanding was past due. The client cannot renegotiate or obtain refinancing and is considering filing bankruptcy. Financial statements were prepared using the going concern basis and this fact is not disclosed.
An equipment which was used by the client for more than 5 years is considered to…
Chapter 12 Solutions
Principles Of Auditing & Other Assurance Services
Ch. 12 - Prob. 1RQCh. 12 - Explain the significance of the purchase order to...Ch. 12 - What segregation of duties would you recommend to...Ch. 12 - Prob. 4RQCh. 12 - Prob. 5RQCh. 12 - Prob. 6RQCh. 12 - Prob. 7RQCh. 12 - Prob. 8RQCh. 12 - Prob. 9RQCh. 12 - When perpetual inventory records are maintained,...
Ch. 12 - What is meant by a bill and hold scheme?Ch. 12 - What charges and credits may be disclosed in the...Ch. 12 - Prob. 13RQCh. 12 - Prob. 14RQCh. 12 - A well-prepared balance sheet usually includes a...Ch. 12 - Darnell Equipment Company uses the LIFO method of...Ch. 12 - Prob. 17RQCh. 12 - Prob. 18RQCh. 12 - Prob. 19RQCh. 12 - Prob. 20RQCh. 12 - Prob. 21QRACh. 12 - Prob. 22QRACh. 12 - Prob. 23QRACh. 12 - Prob. 24QRACh. 12 - Prob. 25QRACh. 12 - Prob. 26QRACh. 12 - Prob. 27QRACh. 12 - Grandview Manufacturing Company employs standard...Ch. 12 - Prob. 29AOQCh. 12 - Prob. 29BOQCh. 12 - The document issued by a common carrier...Ch. 12 - Which of the following should be included as a...Ch. 12 - Prob. 29EOQCh. 12 - Prob. 29FOQCh. 12 - Instead of taking a physical inventory count on...Ch. 12 - Prob. 29HOQCh. 12 - Prob. 29IOQCh. 12 - Prob. 29JOQCh. 12 - Prob. 29KOQCh. 12 - Prob. 29LOQCh. 12 - Prob. 30OQCh. 12 - Adapted AICPA Task-Based Simulation For each of...Ch. 12 - Prob. 32OQCh. 12 - Prob. 33OQCh. 12 - Prob. 34AOQCh. 12 - Prob. 34BOQCh. 12 - Prob. 34COQCh. 12 - Prob. 34DOQCh. 12 - Prob. 34EOQCh. 12 - Prob. 35OQCh. 12 - Prob. 36PCh. 12 - Prob. 37PCh. 12 - Prob. 38PCh. 12 - Prob. 39PCh. 12 - Prob. 40PCh. 12 - Prob. 41PCh. 12 - Prob. 42PCh. 12 - Prob. 43ITCCh. 12 - Prob. 44ECCh. 12 - Western Trading Company is a sole proprietorship...
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