Accounting Information Systems
9th Edition
ISBN: 9781133934400
Author: James A. Hall
Publisher: Cengage Learning
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Chapter 17, Problem 9P
To determine
Discuss the concern of auditor for material invoices. Design a plan to check whether account receivables are overstated or not.
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As the manager of the external audit team, you realize that the embedded audit module only writes material invoices to the audit file for the accounts receivable confirmation process. You are immediately concerned that the accounts receivable account may be substantially overstated this year and for the prior years in which this EAM was used.RequiredExplain why you are concerned because all ‘‘material’’ invoices are candidates for confirmation by the customer. Outline a plan for determining if the accounts receivable are overstated.
ased on an assessment of audit risk, the auditors are concerned with the following two risks:
The risk that that the client might be making duplicate payments to vendors.
The risk that the client’s accounting clerk might be making unauthorized payments to himself.
Required:
a. Assuming that the client has a manual accounting system, describe how the auditors can design a test to identify the duplicate payments and unauthorized payments.
b. Assuming that the client has an IT accounting system, describe how the auditors might use data analytic software to design a test to identify the duplicate payments and the unauthorized payments.
b. Assuming that the client has an IT accounting system, describe how the auditors might use data analytic software to design a test to identify the duplicate payments and the unauthorized payments.
As the audit associate, you were asked by the senior associate to check the completeness of confirmation letters. Upon your review, there is a supplier that has not yet given their reply. What alternative audit procedure would most likely be performed by the audit associate, assuming the audit is at its wrap-up stage?
Group of answer choices
A. Vouch subsequent payments
B. Review the invoice register until audit report date
C. Send another confirmation letter
D. Perform analytical procedures
Chapter 17 Solutions
Accounting Information Systems
Ch. 17 - Prob. 1RQCh. 17 - Prob. 2RQCh. 17 - Prob. 3RQCh. 17 - Prob. 4RQCh. 17 - Prob. 5RQCh. 17 - Prob. 6RQCh. 17 - Prob. 7RQCh. 17 - What is the importance of the SPL?Ch. 17 - Prob. 9RQCh. 17 - Prob. 10RQ
Ch. 17 - Prob. 11RQCh. 17 - Prob. 12RQCh. 17 - What tests may be conducted for identifying...Ch. 17 - Prob. 14RQCh. 17 - Prob. 15RQCh. 17 - Prob. 16RQCh. 17 - Prob. 17RQCh. 17 - Prob. 18RQCh. 17 - Prob. 19RQCh. 17 - Prob. 20RQCh. 17 - Prob. 1DQCh. 17 - Prob. 2DQCh. 17 - Prob. 3DQCh. 17 - What are rounding error routines, and why are they...Ch. 17 - Prob. 5DQCh. 17 - Prob. 6DQCh. 17 - Prob. 7DQCh. 17 - Prob. 8DQCh. 17 - The systems development life cycle is a...Ch. 17 - Prob. 10DQCh. 17 - Prob. 11DQCh. 17 - Compare and contrast the following techniques...Ch. 17 - Prob. 13DQCh. 17 - Prob. 1MCQCh. 17 - Prob. 2MCQCh. 17 - Prob. 3MCQCh. 17 - Prob. 4MCQCh. 17 - Prob. 5MCQCh. 17 - Prob. 6MCQCh. 17 - Prob. 7MCQCh. 17 - Prob. 8MCQCh. 17 - Prob. 9MCQCh. 17 - Prob. 10MCQCh. 17 - Prob. 1PCh. 17 - Prob. 2PCh. 17 - Prob. 3PCh. 17 - Prob. 4PCh. 17 - Prob. 5PCh. 17 - Prob. 6PCh. 17 - Prob. 7PCh. 17 - Prob. 8PCh. 17 - Prob. 9PCh. 17 - Prob. 10PCh. 17 - The Balcar Companys external auditors are...Ch. 17 - Prob. 12PCh. 17 - Prob. 13PCh. 17 - Prob. 14PCh. 17 - Prob. 15P
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- You are the audit partner of ‘Power Auditors’ and you are auditing your client ‘FreefallIncorporated’.After finishing all the tests on the client’s financial information you determine that there is amaterial misstatement in the accounts receivable account of your client. This misstatementhas also caused the sales revenue account to be materially misstated. You have notified theclient about the misstatement but as of reporting date, client has not made any corrections.You also found misstatements in the fixed assets and accounts payable accounts, but theyare not material as per your assessment. You found no other misstatements in the otheraccounts.In addition to this, you also notice that the client has a large amount of debt which will bedue next year. As the business has suffered a loss this year and does not have enough cashflow at the end of the year to pay the debt next year, the client will need to secure someform of refinancing next year. Without this refinancing, there is a…arrow_forwardCourse: Auditing You are the audit partner of ‘Power Auditors’ and you are auditing your client ‘Freefall Incorporated’. After finishing all the tests on the client’s financial information you determine that there is a material misstatement in the accounts receivable account of your client. This misstatementhas also caused the sales revenue account to be materially misstated. You have notified the client about the misstatement but as of reporting date, client has not made any corrections. You also found misstatements in the fixed assets and accounts payable accounts, but they are not material as per your assessment. You found no other misstatements in the otheraccounts. In addition to this, you also notice that the client has a large amount of debt which will be due next year. As the business has suffered a loss this year and does not have enough cash low at the end of the year to pay the debt next year, the client will need to secure some form of refinancing next year. Without this…arrow_forwardBased on an assessment of audit risk, the auditors are concerned with the following two risks: The risk that that the client might be making duplicate payments to vendors. The risk that the client’s accounting clerk might be making unauthorized payments to himself. Required: a. Assuming that the client has a manual accounting system, describe how the auditors can design a test to identify the duplicate payments and unauthorized payments. b. Assuming that the client has an IT accounting system, describe how the auditors might use data analytic software to design a test to identify the duplicate payments and the unauthorized payments. c. Describe the advantages of using data analytics software to identify unusual transactions or entries.arrow_forward
- In reviewing the processes, procedures, and internal controls of one of your audit clients, VeronicaCorporation, you notice the following practices in place. Veronica has recently installed a new electronicdata processing (EDP) system that affects the accounts receivable, billing, and shipping records. Thecompany identified a computer operator who is permanently assigned to each of the functions ofaccounts receivable, billing, and shipping. Each of these computer operators is given the responsibilityof running the program for transaction processing, making program changes, and reconciling thecomputer log. To prevent an operator from having exclusive access to the tapes and documentation,the computer operators randomly rotate the custody and control tasks every two (2) weeks over themagnetic tapes and the system documentation. Access controls to the computer room consist ofmagnetic cards and a digital code for each operator. Moreover, the system analyst and the computeroperation…arrow_forwardAs the audit associate, you were asked by the senior associate to check the completeness of confirmation letters. Upon your review, there is a supplier that has not yet given their reply. What alternative audit procedure would most likely be performed by the audit associate, assuming the audit is at its wrap-up stage? Choices Review the invoice register until audit report date Vouch subsequent payments Perform analytical procedures Send another confirmation letterarrow_forwardThe following audit procedures are included in the auditprogram because of heightened risks of material misstatements due to fraud.1. Use audit software to search cash disbursement master files for missing check numbers.2. Search the accounts receivable master file for account balances with missing orunusual customer numbers (e.g., “99999”).3. Use audit software to create a list of all credits to the repair and maintenanceexpense account for follow-up testing.4. Engage an actuarial specialist to examine management’s assumptions about averagelength of employment and average life expectancy of retirees used in pension accounting decisions.5. Send confirmations to customers for large sales transactions made in the fourth quarterof the year to obtain customer responses about terms related to the transfer of titleand ability to return merchandise.6. Use audit software to search purchase transactions to identify any with nonstandard vendor numbers or with vendor names reflecting related…arrow_forward
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