AUDITING & ASSURANCE SERVICES CONNECT AC
10th Edition
ISBN: 9781259292057
Author: MESSIER
Publisher: MCG
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Chapter 13, Problem 13.31P
To determine
Concept Introduction:
To discuss: The basic inventory-auditing and use ofgeneralized audit software package to perform such procedure.
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An auditor is examining the financial statements of a wholesale cosmetics distributor with an inventory consisting of thousands of individual items. The distributor keeps its inventory in
its own distribution centre and in two public warehouses. An electronic inventory file is maintained on a computer disk, and at the end of each business day the file is updated. Each record of the inventory file contains the following data:
· Item number.
· Location of item.
· Description of item.
· Quantity on hand.
· Cost per item.
· Date of last purchase.
· Date of last sale.
· Quantity sold during year.
The auditor plans to observe the distributor's physical count of inventory as of a given date. The auditor will have available a computer tape of the data on the inventory file on the date of the physical count and a generalized audit software package.
Required:
The auditor is planning to perform basic inventory-auditing procedures. Identify the basic inventory-auditing procedures and describe…
Inventory Procedures Using Computer-Assisted Audit Techniques (CAATs). You are conducting an audit of the financial statements of a wholesale cosmetics distributor with an inventory consisting of thousands of individual items. The distributor keeps its inventory in its own distribution center and in two public warehouses. A perpetual inventory computer database is maintained on a computer disk. The database is updated at the end of each business day. Each record of the perpetual inventory database contains the following data:Item number.Location of item.Description of item.Quantity on hand.Cost per item.Date of last purchase.Date of last sale.Quantity sold during year.You are planning to observe the distributor’s physical count of inventories as of a given date. The client will provide a computer file of the preceding items taken from its database as of the date of the physical count. Your firm has a computer audit plan that will be ideal for analyzing the inventory…
Please can you provide a visual illustration
Chapter 13 Solutions
AUDITING & ASSURANCE SERVICES CONNECT AC
Ch. 13 - Prob. 13.1RQCh. 13 - Prob. 13.2RQCh. 13 - Prob. 13.3RQCh. 13 - Prob. 13.4RQCh. 13 - Prob. 13.5RQCh. 13 - Prob. 13.6RQCh. 13 - Prob. 13.7RQCh. 13 - Prob. 13.8RQCh. 13 - Prob. 13.9RQCh. 13 - Prob. 13.10RQ
Ch. 13 - Prob. 13.11RQCh. 13 - Prob. 13.12RQCh. 13 - Prob. 13.13RQCh. 13 - Prob. 13.14MCQCh. 13 - Prob. 13.15MCQCh. 13 - Prob. 13.16MCQCh. 13 - Prob. 13.17MCQCh. 13 - Prob. 13.18MCQCh. 13 - Prob. 13.19MCQCh. 13 - Prob. 13.20MCQCh. 13 - Prob. 13.21MCQCh. 13 - Prob. 13.22MCQCh. 13 - Prob. 13.23MCQCh. 13 - Prob. 13.24MCQCh. 13 - Prob. 13.25MCQCh. 13 - Prob. 13.26MCQCh. 13 - Prob. 13.27PCh. 13 - Prob. 13.28PCh. 13 - Prob. 13.29PCh. 13 - Prob. 13.30PCh. 13 - Prob. 13.31PCh. 13 - Prob. 13.32P
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- You are working as a summer intern for AAA Auditing, Inc. You have been asked to help resolve discrepancies noted in the audit for Dolfin Corporation, a retailer of specialty aquarium supplies.As a retail company, Dolfin Corporation uses the perpetual inventory system. To prepare for this assignment, you have been asked to review your knowledge of salesand purchase transactions by completing the following table.Consider the effect of each transaction on the three accounts listed, and identify which accounts are debited or credited. If not affected by the transaction, select "No Effect". Inventory Estimated Returns Inventory Cost of Goods Sold Purchase of merchandise for resale Debit Cash sale of merchandise Credit Customer returns Debit Yearly estimate for customer returns Freight paid for merchandise purchased FOB shipping point Debit Return of merchandise purchased for resale Credit Freight paid for sales with FOB destination No Effect Sale on…arrow_forwardTracing the Inventory Count. You have been assigned to trace the results of the observation of Brightware China’s physical inventory count to its pricing and compilation. You note the following conditions.1. The last inventory tag documented by Mark Hulse, the auditor who observed the inventory, was 1732, but you notice a number of items with count ticket numbers higher than 1732. You contact the client’s controller, Marcia Vines, who tells you the client found a storage room full of a new product that Brightware had just produced and added it to the inventory. 2. The count tickets recorded by Hulse agree to the inventory list, but some of the other count tickets you select are substantially different from it. Vines tells you these are input errors and she will have them corrected. 3. Hulse described several boxes of goods as being dusty and even broken. They are included in the inventory at cost. Vines’s explanation is that china never “goes bad” and the goods themselves were not…arrow_forwardYou are working as a summer intern for AAA Auditing. You have been asked to help resolve discrepancies noted in the audit for Dolfin Company, a retailer of specialty aquarium supplies. As a merchandising company, Dolfin Company uses the perpetual inventory system. To prepare for this assignment, you have been asked to review your knowledge of sales and purchase transactions by completing the following table. Consider the effect of each transaction on the three accounts listed, then use checkmarks to identify which accounts are debited or credited. If none of these accounts is affected by the transaction, check the “No Effect” box. Merchandise Inventory Estimated Returns Inventory Cost of Merchandise Sold No Effect Debit Credit Debit Credit Debit Credit Purchase of merchandise for resale Customer returns Customer payment on account Payment of service…arrow_forward
- The inventory control clerk examines the inventory records for items that must bereplenished and prepares a two-part purchase requisition. Copy 1 of the requisition issent to the purchasing department and Copy 2 is filed.Upon receipt of the requisition, the purchase clerk selects a supplier from the validvendor journal (reference file) and prepares a three-part purchase order. Copy 1 is sentto the supplier, Copy 2 is sent to the accounts payable department where it is filedtemporarily, and Copy 3 is filed in the purchasing department.A few days after the supplier ships the order, the goods arrive at the receivingdepartment. They are inspected and the receiving clerk prepares a three-part receivingreport describing the number and quality of the items received. Copy 1 of the receivingreport accompanies the goods to the warehouse, where they are secured and thereceiving report is filed. Copy 2 is sent to inventory control, where the clerk posts to theinventory records (journal) and files…arrow_forwardGuilford Department store is a Barbadian Company that operates in Bridgetown, Barbados. The Company maintains a perpetual inventory system. Its accounting information follows a number of standard operating procedures. Employees in the accounting department post the data manually from the receiving reports, materials requisition forms, copies of purchase orders and other transactions, such as returns and adjustments to the inventory records. The source documents are filed by posting date. The inventory records are analysed after each posting to determine if the item should be reordered. One copy of a purchase requisition is prepared and sent to the purchasing department. The clerks select a vendor from a master vendor file, prepare four copies of the purchase order and update the vendor file to reflect the order. The purchase order is approved and distributed as follows: original copy to the vendor; copy number 2 is filed numerically with the corresponding purchase requisition attached.…arrow_forwardGuilford Department store is a Barbadian Company that operates in Bridgetown, Barbados. The Company maintains a perpetual inventory system. Its accounting information follows a number of standard operating procedures. Employees in the accounting department post the data manually from the receiving reports, materials requisition forms, copies of purchase orders and other transactions, such as returns and adjustments to the inventory records. The source documents are filed by posting date. The inventory records are analysed after each posting to determine if the item should be reordered. One copy of a purchase requisition is prepared and sent to the purchasing department. The clerks select a vendor from a master vendor file, prepare four copies of the purchase order and update the vendor file to reflect the order. The purchase order is approved and distributed as follows: original copy to the vendor; copy number 2 is filed numerically with the corresponding purchase requisition attached.…arrow_forward
- All problems can be completed manually or by using either MyAccountingLab General Ledger or QuickBooks. Using the sales, cash receipts, and general journals Assume Peaceful Spring Company uses the perpetual inventory system. The general ledger of Peaceful Springs Company includes the Following selected accounts, along with their account numbers: Sales and cash receipts transactions in November were as follows: Requirements Use the appropriate journal to record the preceding transactions in a sales journal (omit the Invoice No. column) and a cash receipts journal (omit the Sales Discounts Forfeited column). Total each column of the sales journal and the cash receipts journal. Determine that total debits equal total credits. Show how postings would be made from the journals by writing the account numbers and check marks in the appropriate places in the journals.arrow_forwardTo determine whether accounts payable are complete, auditors perform a test to verify that all merchandise received has been recorded. The population for this test consists of all Multiple Choice A. Receiving reports. B. Purchase orders. C. Canceled checks. D. Vendors’ invoices.arrow_forwardThe perpetual inventory system keeps continuous records of inventories by recording all transactions. This system allows companies, at any given time, to know the current cost of inventory on hand and provides them with a better understanding of their sales profits. With the perpetual inventory system, sales, sales returns and allowances, and purchases are recorded differently than in the periodic inventory system. While the actual sales portion of the sales transaction is recorded the same under both methods, the perpetual inventory system requires an additional step in the recording process. To track the inventory and costs, accountants using the perpetual inventory system debit Cost of Goods Sold and credit Merchandise Inventory. Record the following transactions for West Company in general journal form. West Company uses the perpetual inventory system. ⚫ July 2 Sold merchandise on account to Perry, Inc., invoice no. 1547, $2,125.75. Cost of inventory sold is $1,975.75. ⚫ July 7…arrow_forward
- Enumerate the data and their type that you can identify or infer from the following application areas. 1. Inventory System of XYZ Wholesale Corporation. The company keeps track of pertinent information regarding all the items in stock through its computerized inventory system. This system enables the company to determine in a few keystrokes and at any time the quantity or stock level or every item. It allows XYZ to set the reorder level and reorder quantity each time such that when the stock level falls below the critical level, the item is automatically reordered from its supplier. The preparation of the purchase order is also automated because the supplier and its address, the reorder quantity, the unit cost, and the description of the item are all available on the computer. When an item in stock is replenished (supplied) or diminished(sold), its inventory and its potential profit margin because the unit selling price aside from the unit acquisition cost of each item is also stored…arrow_forwardThe following describes the expenditure cycle manual procedures for a hypothetical company. The inventory control clerk examines the inventory records for items that must be replenished and prepares a two-part purchase requisition. Copy 1 of the requisitionis sent to the purchasing department, and Copy 2 is filed. Upon receipt of the requisition, the purchasing clerk selects a supplier from the valid vendor file (reference file) and prepares a three-part purchase order. Copy 1 is sent to the supplier, Copy 2 is sent to the accounts pay- able department where it is filed temporarily, and Copy 3 is filed in the purchases department. A few days after the supplier ships the order, the goods arrive at the receiving department. They are inspected, and the receiving clerk prepares a three-part receiving report describing the number and quality of the items received. Copy 1 of the receiving report accompanies the goods to the stores, where they are secured. Copy 2 is sent to inventory control,…arrow_forwardInstructions In this assignment you will record eight transactions related to the sale and purchase of merchandise. You will record each transaction according to the procedures of a periodic inventory system. You will record each transaction according to the procedures of a perpetual inventory system. Include the date for each transaction. Include a brief explanation for each entry similar to the sample entry example. Please skip a line between each transaction entry. You may use the journals provided or create your own journals. If you create your own journals they must have a date column, description column, a debit column and a credit column. You may hand write the journal entries or type them. Transactions to Record Sample Ace Company issues a $200 Sales Allowance to a customer who received damaged merchandise purchased in Feb from Ace. Mar 1 Ace Company sells merchandise totaling $1,500 on account with terms 2/15, n/30, FOB destination. Cost of goods is…arrow_forward
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