Mary Howard, CPA, has long audited the Wheat City Grain Company's financial statements. Much of Wheat City's assets consist of wheat stored in three of its grain elevators, and the company maintains perpetual inventory records of the quantity of wheat stores there. Concurrently, on a surprise basis, at different times each month, state grain inspectors also "count" thee quantity of wheat found in these elevator, and have found no material differences in the perpetual records for the five years they have performed this function, To save both time and audit fees, Mary wants to rely on the state inspector's counts instead of her making independent counts thereof. Can Mary do this?

Roland Company, a retail store, has utilized your services as independent auditor for several years. During the current year, the company opened a new store, and in the course of your annual audit, you verify the cost of the fixtures installed in the new store by examining purchase orders, invoices, and other documents. This audit brings to light an understated invoice nearly a year old in which a clerical error by the supplier, Western Showcase, Inc., caused the total of the invoice to read $28,893.62 when it should have read $82,893.62. The invoice was paid immediately upon receipt without any notice of the error, and subsequent statements and correspondence from Western Showcase, Inc., showed that the account with Roland Company had been paid in full. Assume that the amount in question is material in relation to the financial position of both companies.   Assuming that you were later retained to make an audit of Western Showcase, Inc., would you utilize the information gained in…

As you are planning the annual audit of Norton Corporation, you note that the company has a number of user operated computers in use in various locations. One of the machines has been installed in the stores department, which has the responsibility for disbursing stock items and for maintaining stores records. In your audit, you find that one employee receives the requisitions for stores, disburses the stock, maintains the records, operates the computer, and authorizes adjustments to the total amounts of stock recorded by the computer. When you discuss the applicable controls with the department manager, you are told that the user operated computer is assigned exclusively to that department. Therefore, the manager contends that it does not require the same types of controls applicable to large IT systems. a. Comment on the manager’s contention.

As you are planning the annual audit of Norton Corporation, you note at the company has a number of user operated computers in use in various locations. One of the machines has been installed in the stores department, which has the responsibility for disbursing stock items and for maintaining stores records. In your audit, you find that one employee receives the requisitions for stores, disburses the stock, maintains the records, operates the computer, and authorizes adjustments to the total amounts of stock recorded by the computer. When you discuss the applicable controls with the department manager, you are told that the user operated computer is assigned exclusively to that department. Therefore, the manager contends that it does not require the same types of controls applicable to large IT systems. b. Discuss five types of control that would apply to this microcomputer application.

Ginnian and Fitch, a regional accounting firm, performs yearly audits on a number of different for-profit and not-for-profit entities. Two years ago, Luisa Mellina, Ginnians partner in charge of operations, became concerned about the amount of audit time required by not-for-profit entities. As a result, she instituted a series of training programs focusing on the auditing of not-forprofit entities. Now, she would like to see if the training seemed to work. So, she ran a multiple regression on 22 months of data for Ginnian for three variables: the total monthly cost of audit professional time, the number of not-for-profit audits, and the hours of training in the audit of not-for-profit entities. The following printout was obtained: Required: 1. Write out the cost equation for Ginnians audit professional time. 2. If Ginnian expects to have 9 audits of not-for-profits next month and expects that audit professionals will have a total of 130 hours of not-for-profit training, what is the anticipated cost of professional time? 3. Are the hours spent auditing not-for-profit entities positively or negatively correlated with audit professional costs? Is percentage of experienced team members positively or negatively correlated with audit professional cost? 4. What does R2 mean in this equation? Overall, what is your evaluation of the cost equation that was developed for the cost of audit professionals?

During your annual audit of Walker Distributing Company, your assistant, Jane Williams, reports to you that, although a number of entries were made during the year in the general ledger account Notes Payable to Officers, she decided that it was not necessary to audit the account because it had a zero balance at year-end.   Required: Do you agree with your assistant’s decision? Discuss.

You are retained by Columbia Corporation to audit its financial statements for the fiscal year ended June 30. Your consideration of internal control indicates a fairly satisfactory condition, although there are not enough employees to permit an extensive separation of duties. The company is one of the smaller units in its industry, but it has realized net income of about $500,000 in each of the last three years.   Near the end of your fieldwork, you overhear a telephone call received by the president of the company while you are discussing the audit with him. The telephone conversation indicates that on May 15 of the current year, the Columbia Corporation made an accommodation endorsement of a 60-day $430,000 note issued by a major customer, Brill Corporation, to its bank. The purpose of the telephone call from Brill was to inform your client that the note had been paid at the maturity date. You had not been aware of the existence of the note before overhearing the telephone call.…

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.

Richard Foster, an assistant auditor, was assigned to the year-end audit work of Sipher Corporation. Sipher is a small manufacturer of language translation equipment. As his first assignment, Foster was instructed to test the cutoff of year-end sales transactions. Because Sipher uses a calendar year-end for its financial statements, Foster began by obtaining the computer-generated sales ledgers and journals for December and January. He then traced ledger postings for a few days before and after December 31 to the sales journals, noting the dates of the journal entries. Foster noted no journal entries that were posted to the ledger in the wrong accounting period. Thus, he concluded that the client’s cutoff of sales transactions was effective. Please explain the validity of Foster’s conclusion.

You have been assigned to the audit of Carter Brandon Co (CBC), and you are drafting the audit for payables and accruals for the year ended 31 December 20x7. The company operates from a site in West Wendon. All raw materials are received in the stores and all deliveries are checked to the delivery note and purchase order. The stores supervisor raises a goods received note and is also responsible for raising credit requests if there are any problems with the raw materials delivered.When the purchase ledger department staff receive the purchase invoices, they match them to the relevant goods received notes and purchase orders, and post them to the computerised purchase ledger. Suppliers are paid on the last day of each month. Other payables and accruals consist of tax, wages and other statutory deductions, accruals and time- apportioned expenses such as electricity and telephone.a. Assess the audit work you will carry out to compare suppliers' statements with balances recorded on the…