Leah Pasternak Auditing I – ACC403 Homework Submission Chapter 7 Problems
7-29: a) Direct confirmation with the vendor and examination of the invoice from the vendor. b) Physical examination of the inventory and direct confirmation of the inventory with the custodian. c) Examination of the cash receipt journal and the deposits of bank for cash receipts as well as directly confirming with the customer. d) Examine the vendor’s invoice and examine the title for ownership of the assets. e) Examine the copy of the client of vendor’s statements and direct confirmation with the banker. f) Physical examination and examination of the sales invoice of sale of goods reflecting the sale price. g) Count the petty cash and confirm with the custodian. 7-33: Audit Procedure
Audit Evidence
1. 2. 3. 4. 5.
Physical Examination Analytical Procedures Recalculation Recalculatio n Inquiry of the Client Confirmation Confirmatio n
6. 7.
Physical Examination Documentation
Audit Objective
Accuracy and Existence Accuracy Detail Tie-in Realizable Values Completeness, Accuracy and Existence Accuracy and Completeness Rights
Chapter 8 Problems
8-29: a) A related party transaction occurs when one party within the transaction is able to impose the contract terms which would not have happened to the parties if they would have been unrelated. When the related party transactions are of a material nature, the following documents are needed: 1. Nature of relationships and 2. description of the transaction for the reported period. b) I believe that all of the preceding transactions would would be considered related party transactions. transactions. c) Some of the financial statement implications implications that could occur would be the lease of the property from Mr. Smedes who happens to be a member of Canyon Outdoor’s board of directors, and also the lines of
credit who are managed by the lending officer Suzanne Strayhorn who is also the wife of the largest investor of Canyon Outdoor. d) Some procedures the auditor may perform in order to identify potential related party transaction would be; inquire of management the identity of the entity’s related parties, including changes from the prior period, inquire as to the nature of the relationships relationships between the entity and the potential related
parties, inquire as to whether the entity entered into any transactions with these related parties during the period, and if so, the type and purpose of the transactions. 8-32: a) Account Executive Salaries
10/31/12 Balance 546,940
Factory Hourly Payroll
10,038,877
Factory Supervisor’s
Salaries Office Salaries
785,825 1,990,296
Sales Commissions
2,018,149
Notes 3% increase; 546,940 X 103% 3% increase; 10,038, 877 X 103% 3% increase; 785,825 X 103% 3% increase; 1,990,296 X 103% Increase in sales = 6,157,948 6,157,947 X 75% = 4,618,461 4,618,461 X 5% = 230,923 2,018,149 + 230,923
Final Balance $563,348 $10,811,067 $809,400 $2,050,005 $2,249,072
b) Details
Sales Executive’s Salary
Factory Hourly Pay Factory Sup. Salary Office Salaries Sales Commissions
2013 Expected
57,474,182 615,970 11,476,319 810,588 2,055,302 2,367,962
2013 Actual
57,474,182 563,348 10,811,067 809,400 2,050,005 2,249,072
Difference
0 (52,622) (665,252) (1,188) (5,297) (118,890)
Difference in %
0% -8.54% -5.8% -0.15% -0.26% -5.02%
