Explanation The explanation for the auditing procedure and control procedure is as below: Case 1 Audit procedure: Schedule of inter-bank transaction and the date of deposits were noted. Control procedure: Labeling should be done for all the inter-company transactions to overcome the kiting work. Case 2 Audit procedure: The balances of accounts receivables are being verified and a summary of the procedure followed by the customer is checked. Control procedure: Different persons are allocated opening cash envelopes and for recoding the credits in the account receivable accounts. Case 3 Audit procedure: Cash discounts that are being wrongly recorded are reviewed properly with the discount policies of the company. Control procedure: Proper procedure should be defined for the document prepared as cash discounts and management must be reported for such discounts regularly. Case 4 Audit procedure: Reconciliation of bank statement is being verified properly. Control procedure: Audit tests should be performed without the supervision of the controller. Case 5 Audit procedure: A schedule should be prepared to show the investment and interest rate for the lower-rated Certificate of deposits to check the securities...

Auditing: A Risk Based-Approach to Conducting a Quality Audit

10th Edition

ISBN: 9781305080577

Author: Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher: South-Western College Pub

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Audit Procedures

Audit Procedures are methods and techniques performed by the auditor to determine the quality of financial information of clients, thereby expressing an opinion on true & fair view of financial statements and entity position. They are identified and appl…

Question

Chapter 10, Problem 55RSCQ

To determine

Introduction: A Substantive procedure is a process or step performed by an auditor to collect sufficient and appropriate evidence regarding the completeness, accuracy, occurrence of a transaction or event.

Substantive audit procedures to be performed in each case to discover the misstatement.

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Chapter 10 Solutions

Auditing: A Risk Based-Approach to Conducting a Quality Audit

Ch. 10 - Which of the following assertions is relevant to...Ch. 10 - Match the following assertions with their...Ch. 10 - Prob. 47RSCQ Ch. 10 - Prob. 53RSCQ Ch. 10 - Prob. 54RSCQ Ch. 10 - Prob. 55RSCQ Ch. 10 - Prob. 57RSCQ

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Read the following scenario about Strang Corporation and identify the substantive procedures that the CPA (Elaine Stanley) should perform to determine whether lapping exists. Do not discuss deficiencies in the system of internal control. During the year, Strang Corporation began to encounter cash flow difficulties, and a cursory review by management revealed receivable collection problems. Strang’s management engaged Elaine Stan ley, CPA, to perform a special investigation. Stanley studied the billing and collection cycle and noted the following: The accounting department employs one bookkeeper who receives and opens all incoming mail. This bookkeeper is also responsible for depositing receipts, filing daily remittance advices, recording receipts in the cash receipts journal, and posting receipts in the individual customer accounts and the general ledger accounts. There are no cash sales. The bookkeeper prepares and controls the mailing of monthly statements to customers. The concentration of functions and the receivable collection problems caused Stanley to suspect that a systematic theft of customers’ payments through a delayed posting of remittances (lapping of accounts receivable) is present.
A bank reconciliation takes time and must balance. An employee was struggling in balancing the bank reconciliation. Her supervisor told her to plug (make an unsupported entry for) the difference, record to Miscellaneous Expense, and simply move on. Discuss the internal controls problem with this directive.

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