The following misstatements are included in the accountingrecords of Lathen Manufacturing Company:1. Joe Block and Frank Demery take turns “punching in” for each other every few days.The absent employee comes in at noon and tells his foreman that he had car troubleor some other problem. The foreman does not know that the employee is getting paidfor the time.2. The foreman submits a fraudulent time card for a former employee each week anddelivers the related payroll check to the employee’s house on the way home fromwork. They split the amount of the paycheck.3. Employees often overlook recording their hours worked on job-cost tickets asrequired by the system. Many of the client’s contracts are on a cost-plus basis.4. Direct labor was unintentionally charged to job 620 instead of job 602 by the payrollclerk when he key-entered the labor distribution sheets. Job 602 was completed andthe costs were expensed in the current year, whereas job 620 was included in workin-process.5. The payroll clerk prepares a check to the same nonexistent person every week whenhe enters payroll transactions in the computer system, which also records the amountin the payroll journal. He submits it along with all other payroll checks for signature.When the checks are returned to him for distribution, he takes the check and depositsit in a special bank account bearing that person’s name.6. In withholding payroll taxes from employees, the computer operator deducts $0.50extra federal income taxes from several employees each week and credits the amountto his own employee earnings record.7. The payroll clerk manually prepares payroll checks but often forgets to record oneor two checks in the computer-prepared payroll journal.a. For each misstatement, state a control that should have prevented it from occurringon a continuing basis.b. For each misstatement, state a substantive audit procedure that could uncover it.
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
The following misstatements are included in the accounting
records of Lathen Manufacturing Company:
1. Joe Block and Frank Demery take turns “punching in” for each other every few days.
The absent employee comes in at noon and tells his foreman that he had car trouble
or some other problem. The foreman does not know that the employee is getting paid
for the time.
2. The foreman submits a fraudulent time card for a former employee each week and
delivers the related payroll check to the employee’s house on the way home from
work. They split the amount of the paycheck.
3. Employees often overlook recording their hours worked on job-cost tickets as
required by the system. Many of the client’s contracts are on a cost-plus basis.
4. Direct labor was unintentionally charged to job 620 instead of job 602 by the payroll
clerk when he key-entered the labor distribution sheets. Job 602 was completed and
the costs were expensed in the current year, whereas job 620 was included in workin-process.
5. The payroll clerk prepares a check to the same nonexistent person every week when
he enters payroll transactions in the computer system, which also records the amount
in the payroll journal. He submits it along with all other payroll checks for signature.
When the checks are returned to him for distribution, he takes the check and deposits
it in a special bank account bearing that person’s name.
6. In withholding payroll taxes from employees, the computer operator deducts $0.50
extra federal income taxes from several employees each week and credits the amount
to his own employee earnings record.
7. The payroll clerk manually prepares payroll checks but often forgets to record one
or two checks in the computer-prepared payroll journal.
a. For each misstatement, state a control that should have prevented it from occurring
on a continuing basis.
b. For each misstatement, state a substantive
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