ACP AUDITING - RISK BASED APPROACH
10th Edition
ISBN: 9780357195079
Author: JOHNSTONE
Publisher: CENGAGE C
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Question
Chapter 2, Problem 14MCQ
To determine
Introduction:Fraudulent financial reporting refers to manipulations of income earned by the management in order to have personal gains or to prevent an organization from bankruptcy or any other negative financial results.
To identify:The example of fraudulent financial reporting.
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Which of the following is least indicative of fraudulent activity?a. Numerous cash refunds have been made to different people at the same post office box address.b. Internal auditors cannot locate several credit memos to support reductions of customers’ balances.c. Bank reconciliation has no outstanding checks or deposits older than 15 days.d. Three people were absent the day the auditors handed out the paychecks and have not picked them up four weeks later.
Pls explain first how you solve it. Thank you.
F COMPANY, organized on March 1, 2021, has a very poor internal control system. Thecompany's cashier is also its accountant. After 9 months of operations, the company's managersuspects that the cashier-accountant has been misappropriating company collections. You havebeen engaged to audit the company's accounts to determine the extent of fraud, if any.
You started the audit on November 15. On that date, the cash on hand per your surprise countwas P5,140. Also on that date, the bank confirmed that the balance of the company's currentaccount was P26,328. Your examination of the records reveals that a check for P1,852 wasoutstanding on November 15. The company's markup is 40% of sales.
Further examination of the company's records reveals the following balances at November 15,2021:
Assume that brooke miles accounts payable clerk for west coast design inc.stole $48,350 by paying fictitious companies and cashed the checks at a local banks. Describe a control procedure that would have prevented or detected the fraud?
Chapter 2 Solutions
ACP AUDITING - RISK BASED APPROACH
Ch. 2 - The Great Salad Oil Swindle of 1963 is an asset...Ch. 2 - Prob. 2TFQCh. 2 - The three elements of the fraud triangle include...Ch. 2 - Prob. 4TFQCh. 2 - Prob. 5TFQCh. 2 - Prob. 6TFQCh. 2 - Prob. 7TFQCh. 2 - Prob. 8TFQCh. 2 - Prob. 9TFQCh. 2 - Prob. 10TFQ
Ch. 2 - Prob. 11TFQCh. 2 - Prob. 12TFQCh. 2 - Prob. 13MCQCh. 2 - Prob. 14MCQCh. 2 - Prob. 15MCQCh. 2 - Prob. 16MCQCh. 2 - Prob. 17MCQCh. 2 - Prob. 18MCQCh. 2 - Prob. 19MCQCh. 2 - Prob. 20MCQCh. 2 - Prob. 21MCQCh. 2 - Prob. 22MCQCh. 2 - Prob. 23MCQCh. 2 - Prob. 24MCQCh. 2 - Prob. 25RSCQCh. 2 - Prob. 26RSCQCh. 2 - Prob. 27RSCQCh. 2 - Refer to Exhibit 2.1 a. What is a Ponzi scheme? b....Ch. 2 - Prob. 29RSCQCh. 2 - Prob. 30RSCQCh. 2 - Prob. 31RSCQCh. 2 - Prob. 32RSCQCh. 2 - Prob. 33RSCQCh. 2 - Prob. 34RSCQCh. 2 - Prob. 35RSCQCh. 2 - Prob. 36RSCQCh. 2 - Prob. 37RSCQCh. 2 - Prob. 38RSCQCh. 2 - Many consider the Enron fraud to be one of the...Ch. 2 - Prob. 40RSCQCh. 2 - Prob. 41RSCQCh. 2 - Refer to Exhibit 2.5 and answer the following...Ch. 2 - Prob. 43RSCQCh. 2 - Prob. 44RSCQCh. 2 - Prob. 45RSCQCh. 2 - Prob. 46RSCQCh. 2 - Prob. 47RSCQCh. 2 - Prob. 48RSCQCh. 2 - Prob. 49RSCQCh. 2 - Prob. 50FFCh. 2 - Prob. 51FFCh. 2 - Prob. 52FF
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- Which of the following internal control activities will most likely prevent the concealment of a cash shortage by improperly writing off a trade account receivable?a. Write-offs must be approved by a responsible officer after review of credit department recommendations and supporting evidence.b. Write-offs must be supported by an aging schedule showing that only receivables overdue several months have been written off.c. Write-offs must be approved by the cashier who is in a position to know whether the receivables have, in fact, been collected.d. Write-offs must be authorized by company field sales employees who are in a position to determine customers’ financial standing.arrow_forwardAllison Everhart, an employee in accounts payable, believes she can run a fictitious invoice through the accounts payable system and collect the money. She knows payments are subject to an audit. Which account would be the best place to hide the fraud?a. Inventory.b. Wage expense.c. Consulting service expense.d. Property tax expense.arrow_forwardWhich of the following is not a generally recognized internal control activity? Oa. limiting access to computerized accounting records Ob. reducing the cost of hiring seasonal employees Oc. preparation of bank reconciliations on a monthly basis Od. establishment of clear lines of authority to carry out specific tasksarrow_forward
- On February 15, 2022, Kate Collins, owner of Kate’s Cards, asks you to investigate the cash han- dling activities in her business. She believes that a new employee might be stealing funds. “I have no proof,” she says, “but I’m fairly certain that the January 31, 2022, undeposited receipts amounted to more than $12,000, although the January 31 bank reconciliation prepared by the cashier (who works in the treasurer’s department) shows only $7,238.40. Also, the January bank reconciliation doesn’t show several checks that have been outstanding for a long time. The cashier told me that these checks needn’t appear on the reconciliation because he had notified the bank to stop payment on them and he had made the necessary adjustment on the books. Does that sound reasonable to you?” At your request, Kate shows you the following (unaudited) January 31, 2022, bank reconciliation prepared by the cashier: KATE’S CARDS Bank Reconciliation January 31, 2022 Ending balance from bank statement . . . $…arrow_forwardHenry Mills is responsible for preparing checks, recording cash disbursements, and preparing bank reconciliations for Signet Corporation. While reconciling the October bank statement, Mills noticed that several checks totaling $9,370 had been outstanding for more than one year. Concluding that these checks would never be presented for payments, Mills prepared a check for $9,370 payable to himself, forged the treasurer’s signature, and cashed the check. Mills made no entry in the accounts for this disbursement and attempted to conceal the theft by destroying the forged check and omitting the long-outstanding checks from subsequent bank reconciliations. Required: a. Identify the weaknesses in Signet Corporation’s internal control. b. Explain several audit procedures that might disclose the fraudulent disbursement.arrow_forwardScenario: You are an assistant manager of a high-end retail store and, through routine end-of-day accounting procedures, you have discovered your long-time coworker, who is also an assistant manager and good friend, has been embezzling from the company. Use your knowledge related to the ways employees conduct fraud to build a case for how your coworker might have embezzled money. How would you utilize the store’s accounting software to access data and find the proper evidence to determine if it truly is fraud? To whom would you report your findings? Would you confront your coworker/friend?arrow_forward
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