Principles Of Auditing & Other Assurance Services
21st Edition
ISBN: 9781259916984
Author: WHITTINGTON, Ray, Pany, Kurt
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 21, Problem 47P
Devry Corporation has established an independent foundation for the purposes of community improvement. The foundation employs an executive director and eight staff people. The internal auditors of the company were requested to do an audit of the foundation in 20X1 to determine problems with the recording of transactions, the handling of cash, and documentation of transactions. The following items were found:
- 1. The foundation used the cash basis of reporting rather than the accrual basis.
- 2. The foundation lacked a copy of the plane ticket for airfare reimbursed for a trip taken by one of the volunteers.
- 3. Excess funds were invested in instruments other than those specified by the organization’s policy manual.
- 4. The purchase of a desktop publishing system was expensed.
- 5. The foundation does not employ anyone with formal accounting training.
- 6. Many errors were made in recording transactions, which necessitated many year-end
adjusting entries . - 7. Numerous certificates of deposit were found in many different locations (e.g., filing cabinets, desk drawers, and a safe deposit box).
- 8. The checking account was reconciled by the individual who wrote the checks.
Required:
Write an internal audit report (in proper form) to the executive committee of the foundation indicating findings and recommendations. (CIA, adapted)
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Taylor, a CPA, has been engaged to audit the financial statements of University Books, Incorporated. University Books maintains a large cash fund exclusively for the purpose of buying used books from students for cash. The cash fund is active all year because the nearby university offers a large variety of courses with varying starting and completion dates throughout the year. Receipts are prepared for each purchase. Reimbursement vouchers periodically are submitted to replenish the fund.
Required:Construct an internal control questionnaire to be used in evaluating the internal control over University Books’ repurchasing process using the revolving cash fund. The internal control questionnaire should elicit a yes or no response to each question. Do not discuss the internal controls over books that are purchased from publishers.
Your student club recently volunteered to go door-to-door collecting cash donations on behalf ofa local charity. The charity’s accountant went berserk when you said you wrote receipts only fordonors who asked for one.Required:Identify the control principle that you violated and explain how that violation could allow fraud tooccur. What controls might be appropriate to use in the future?
Identify the internal control principle that was violated in each of the following separate situations. a. The recordkeeper left town after the owner discovered a large sum of money had disappeared. An audit found that the recordkeeper had written and signed several checks made payable to his fiancée and recorded the checks as salaries expense. b. An employee was put in charge of handling cash. That employee later stole cash from the business. The company incurred an uninsured loss of $184,000. c. There is $500 in cash missing from a cash register drawer. Three salesclerks shared the cash register drawer, so the owner cannot determine who is at fault.
Chapter 21 Solutions
Principles Of Auditing & Other Assurance Services
Ch. 21 - Prob. 1RQCh. 21 - Prob. 2RQCh. 21 - Prob. 3RQCh. 21 - Prob. 4RQCh. 21 - Prob. 5RQCh. 21 - Prob. 6RQCh. 21 - Prob. 7RQCh. 21 - Prob. 8RQCh. 21 - Prob. 9RQCh. 21 - Prob. 10RQ
Ch. 21 - Prob. 11RQCh. 21 - Prob. 12RQCh. 21 - Prob. 13RQCh. 21 - Prob. 14RQCh. 21 - Prob. 15RQCh. 21 - Prob. 16RQCh. 21 - Prob. 17RQCh. 21 - Prob. 18RQCh. 21 - Prob. 19RQCh. 21 - Prob. 20RQCh. 21 - Prob. 21RQCh. 21 - Prob. 22RQCh. 21 - Prob. 23RQCh. 21 - Prob. 24RQCh. 21 - Prob. 25RQCh. 21 - Prob. 26RQCh. 21 - Prob. 27RQCh. 21 - Prob. 28RQCh. 21 - Prob. 29RQCh. 21 - Explain how major federal assistance programs are...Ch. 21 - Describe what is meant by a questioned cost.Ch. 21 - Distinguish between a subrecipient and a primary...Ch. 21 - Prob. 33RQCh. 21 - Prob. 34QRACh. 21 - Steve Ankenbrandt, president of Beeb Corp., has...Ch. 21 - Prob. 36QRACh. 21 - Prob. 37QRACh. 21 - Prob. 38QRACh. 21 - Prob. 39QRACh. 21 - Prob. 40QRACh. 21 - Prob. 41QRACh. 21 - Prob. 42QRACh. 21 - Prob. 43AOQCh. 21 - Prob. 43BOQCh. 21 - Prob. 43COQCh. 21 - Prob. 43DOQCh. 21 - Prob. 43EOQCh. 21 - Prob. 43FOQCh. 21 - Prob. 43GOQCh. 21 - Prob. 43HOQCh. 21 - Prob. 43IOQCh. 21 - Prob. 43JOQCh. 21 - Prob. 43KOQCh. 21 - Prob. 43LOQCh. 21 - Prob. 44OQCh. 21 - Prob. 45OQCh. 21 - Prob. 46PCh. 21 - Devry Corporation has established an independent...Ch. 21 - Prob. 48PCh. 21 - Prob. 49PCh. 21 - Prob. 50ITC
Knowledge Booster
Learn more about
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
- The auditor of Cubs obtained the following client-prepared bank reconciliation (See Image) The following information is available: Evan Monroe was promoted to controller on December 15, year 2; his former position was assistant controller—fixed assets. Evan Monroe has his personal bank accounts with First Bank of Munich. Joe Smith was hired on December 1, year 2, as a staff accountant. Joe Smith’s prior job was with First Bank of Munich. Cubs expects the year-end close to be complete on January 6, year 3. The adjustments on the bank reconciliation were booked on January 30, year 3. Required: In the table below, identify six potential issues that the auditor might have when examining the bank reconciliation prepared by Cubs from the list provided of potential issues. An issue may be used once or not at all. Reconciliation is not mathematically accurate. Reconciliation balance was not properly agreed to the December 31 general ledger balance.…arrow_forwardNote:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardWhich of the following circumstances would most likely cause an audit team to performextended procedures?a. Supporting documents are produced when requested.b. The client made several large adjustments at or near year-end.c. The company has recently hired a new chief financial officer after the previous oneretired.d. The company maintains several different petty cash fundsarrow_forward
- ABC Company established a petty cash fund for small expenses of the offices of the main building which amounts to P25,000. To track the fund usage, the cash custodian uses petty cash vouchers (PCV) and places the fund inside a cash box. Employees’ vale and check accommodation (with P1,000 maximum) are allowed disbursements out of the fund. If the fund depletes to P2,000, the custodian is authorized to replenish the fund by preparing a summary of disbursements. At the end of the first month, the internal auditor conducted a surprise cash count with the presence of the petty cash custodian. The auditor found the following items inside the petty cash box: Coins – 45.00; Bills – 2,800; PCV with expense receipts totaled 5,800; employee’s check amounting to 1,000; separated bills amounting P2,500 stapled together with a note which indicates “for department’s summer outing”; employee’s IOUs/ vale sheets totaling 225; a note from Kaging Store worded ‘deposit’ P30 for 3 liters of soft drinks.…arrow_forwardABC company is a start-up company, they only have less than 20 personnel. Thetreasury function maintains the custody of funds, investments and the record-keepingof cash and investment related transactions. Which of the following compensatorycontrol should be employed in the absence of segregation of duties? A. The treasurer handling the transaction should periodically reconcile the cash book andinvestment records.B. The transactions should be properly authorized by the CFO.C. An accounting supervisor should review the cash and investment related entries posted in the company's books.D. The treasurer should maintain the certificates of investments in a safety deposit box.arrow_forwardAs one of the year-end audit procedures, the auditor instructed the client's personnel to prepare a confirmation request for a bank account that had been closed during the year. After the client's treasurer has signed the request, it was mailed by the assistant treasurer. What is the major flaw in this audit procedure? a. The confirmation request was signed by the treasurer. b. Sending the request was meaningless because the account was closed before the year end. c. The request was mailed by the assistant treasurer. d. The CPA did not sign the confirmation request before it was mailed.arrow_forward
- You are testing the controls over bank accounts for your audit client, Orleans Ltd. You note that the responsibility for bank reconciliations has changed due to a corporate reorganization halfway through the current financial year. Both the staff member performing the bank reconciliations and the supervisor have changed. You are able to talk to only the current staff member and supervisor because the other staff took voluntary redundancies and left the client’s employment six months ago. Required: (a) What techniques are available to you to gather evidence about the bank reconciliations? Explain how you would use each technique and comment on the quality of the evidence obtained from each (b) When you ask the employees responsible for bank reconciliations about how they perform the reconciliations there is a possibility that they will not tell the whole truth about their performance of the reconciliations. Given this, will you bother to ask them? Explain (c) Explain the impact of the…arrow_forward! Required information [The following information applies to the questions displayed below.] Service World maintains a petty cash fund. The fund custodian encountered the following events. a. The fund was established when a check for $375 was cashed and deposited into a locked cash box. b. An employee submitted a receipt for a customer delivery costing $35 and was reimbursed in full from petty cash. c. Another employee submitted a receipt for $75 for locksmith repairs to the office door and was reimbursed in full from petty cash. d. An employee submitted a receipt for newspaper advertising that cost the company $65. She was given $65 from the petty cash box. e. The petty cash custodian received and cashed a check that fully replenished the petty cash fund. f. An employee submitted a receipt for $50 for supplies and was reimbursed in full from petty cash. g. An employee submitted a receipt for $80 for filling up his personal vehicle. He was not reimbursed because it would violate…arrow_forwardIn a recent financial fraud case, city employees in Brooklyn, New York, accessed electronic databases to defraud the city of $20 million. Several employees in collusion with the former deputy tax collector completely erased or reduced $13 million in property taxes and $7 million in accrued interest that taxpayers owed. In exchange for this service, the taxpayers paid the employees involved bribes of 10 to 30 percent of their bills. Required Discuss the control techniques that could prevent or detect this fraud.arrow_forward
- 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:arrow_forwardmunabhaiarrow_forwardGolden bank recently appointed the accounting firm Sanford,Son and Golrich as the banks auditors. The Bank quickly became one of Sanford,Son and Golrich’s largest clients. Subject to Reserve bank regulations,Golden Bank must provide for any expected losses on Accounts Receivable that the bank might not collect in full. During the course of the audit ,Sanford,Son and Golrich determined that the collectability of three large accounts of Golden bank seemed questionable. The auditors discussed this with Debbie Lee, the Financial controller . She assured the auditors that the loans were good and the debtors will be able to pay them in full once the economy recovers. Due to the effect of the covid 19 pandemic on the economy ,what the controller says is unlikely. Therefore Sanford,Son and Golrich must record a loss for the portion of the Accounts Receivable that might not be collectible.The controller objected and threatened to dismiss the auditors if they keep on insisting that the bank…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
Business Its Legal Ethical & Global EnvironmentAccountingISBN:9781305224414Author:JENNINGSPublisher:Cengage
Auditing: A Risk Based-Approach to Conducting a Q...AccountingISBN:9781305080577Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:South-Western College Pub
Auditing: A Risk Based-Approach (MindTap Course L...
Accounting
ISBN:9781337619455
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:Cengage Learning
Business Its Legal Ethical & Global Environment
Accounting
ISBN:9781305224414
Author:JENNINGS
Publisher:Cengage
Auditing: A Risk Based-Approach to Conducting a Q...
Accounting
ISBN:9781305080577
Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg
Publisher:South-Western College Pub
Computer Fraud; Author: Mitch Wenger (Accounting Systems & Tech);https://www.youtube.com/watch?v=-s82SCuMaTI;License: Standard Youtube License