Auditing and Assurance Services (16th Edition)
16th Edition
ISBN: 9780134065823
Author: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Chris E. Hogan
Publisher: PEARSON
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Question
Chapter 18, Problem 6DQP
To determine
Evaluate the given statement about auditor concerning tests of acquisitions and cash disbursements.
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Which of the following procedures would an auditor most likely perform in searching for unrecorded liabilities?
A. Vouch a sample of cash disbursements recorded just after year end to receiving reports and vendor invoices.
B. Compare a sample of purchase orders issued just after year-end with the year-end accounts payable balance.
C. Scan the cash disbursement entries recorded just before year end for indications of unusual transactions.
D. Vouch a sample of accounts payable entries recorded just before year end to the unmatched receiving report file.
The auditors of Steffey Ltd., decided to study the cash receipts and disbursements for the month of July of the current year under audit. They obtained the bank reconciliations and the cash journals prepared by the company accountants, which revealed the following:
June 30: Bank balance, $355,001; deposits in transit, $86,899; outstanding checks, $42,690; general ledger cash balance, $399,210.
July 1: Cash receipts journal, $650,187; cash disbursements journal, $565,397. July 31: Bank balance, $506,100; deposits in transit, $51,240; outstanding checks, $73,340; general ledger cash balance, $484,000. Bank statement record of deposits: $835,846; of payments: $684,747.
Required:
Prepare a four-column proof of cash covering the month of July of the current year. (Negative amounts or amounts to be deducted should be indicated by a minus sign.)
You are auditing Abra Inc.’s cash in bank for the year ended December 31, 2021. You assessed control risk over cash related cycles at the maximum level, thus you have decided to render an extensive substantive test procedure. As a result you ascertained the following information related to the company’s bank reconciliation items for two months:
November 30
December 31
Cash per books
P82,350
P221,425
Cash per bank statements
535,410
689,085
Undeposited collections
41,005
?
Outstanding checks
138,590
?
Bank service charges
3,600
3,000
Insufficient fund check
4,250
Company’s notes receivable collected by bank
359,075
404,500
The bank statement and the company’s cash records show the following totals:
Checks and debit memos per bank statement, P1,091,865
Cash receipts per cash records, P1,182,260
Cash disbursements per cash records, P1,043,185
Deposits and credit memos per bank statement, P1,245,540
The…
Chapter 18 Solutions
Auditing and Assurance Services (16th Edition)
Ch. 18 - List five asset accounts, three liability...Ch. 18 - Prob. 2DQPCh. 18 - Prob. 3DQPCh. 18 - Prob. 4DQPCh. 18 - Prob. 5DQPCh. 18 - Prob. 6DQPCh. 18 - Prob. 7DQPCh. 18 - Prob. 8DQPCh. 18 - Prob. 9DQPCh. 18 - Prob. 10DQP
Ch. 18 - Prob. 11DQPCh. 18 - Prob. 13DQPCh. 18 - Prob. 14DQPCh. 18 - Prob. 15DQPCh. 18 - Prob. 16.1MCQCh. 18 - Prob. 16.2MCQCh. 18 - Prob. 16.3MCQCh. 18 - Prob. 17.1MCQCh. 18 - Prob. 17.2MCQCh. 18 - Prob. 17.3MCQCh. 18 - Prob. 17.4MCQCh. 18 - Prob. 18.3MCQCh. 18 - Prob. 18.1MCQCh. 18 - Prob. 18.2MCQCh. 18 - Prob. 19DQPCh. 18 - Prob. 20DQPCh. 18 - Prob. 21DQPCh. 18 - Prob. 22DQPCh. 18 - Prob. 23DQPCh. 18 - The following misstatements are included in the...Ch. 18 - Prob. 25DQPCh. 18 - Prob. 26DQPCh. 18 - Prob. 27DQPCh. 18 - Prob. 28DQPCh. 18 - Prob. 29DQPCh. 18 - Prob. 30C
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Similar questions
- The CPAs test of detail transactions included the following auditing procedures which were undertaken for a selected test-month: CASH RECEIPTS: Reconciled credits per bank statement with receipts per book. Traced deposits to remittance advices. Traced totals to the general ledger. Footed the cash book. CASH DISBURSEMENTS: E. Compared cancelled checks with check register for name, signature, payee and endorsement. F. Footed check register G. Traced totals to the general ledger. H. Examined invoices, cash vouchers and other documents supporting disbursements (other than payroll disbursements) I. Reconciled recorded disbursements with charges per bank statement. Directions: Below are presented some of the more common methods of concealing shortages. For each of these items, indicate the letter of the auditing procedure listed above which most likely to uncover the shortage. If the answer is "NONE", so state on the space provided. No. Items ANSWER 1. Check included in petty cash…arrow_forwardWhich of the following procedures would an auditor most likely perform in searching for unrecorded liabilities? O Compare a sample of purchase orders issued just after year-end with the year-end accounts payable trial balance. Trace a sample of accounts payable entries recorded just before year-end to the unmatched receiving report file. O Scan the cash disbursements entries recorded just before year-end for indications of unusual transactions. O Vouch a sample of cash disbursements recorded just after year-end to receiving reports and vendor invoices.arrow_forwardBy preparing a four-column bank reconciliation ("proof of cash") at year-end, an auditor will generally be able to detect: a. An unrecorded deposit made at the bank at the end of the month. b. A second payment of an account payable which had already been paid in full two months earlier. c. An embezzlement of cash receipts not recorded in the cash receipts journal before they had been deposited into the bank. d. A receivable collected that had previously been written off as uncollectible.arrow_forward
- Timing of Test of Controls and Sample Selection. Susan Hill was examining controlsfor the authorization of cash disbursements. She selected cash disbursement entries madethroughout the year and vouched them to paid invoices and canceled checks bearing the initials and signatures of employees authorized to approve the disbursements. She performedthe work on September 30 when the company had issued checks numbered 43921 to 52920.Because 9,000 checks had been issued in nine months, she reasoned that 3,000 more couldbe issued in the three months before the December 31 year-end. About 12,000 checks hadbeen issued last year. She wanted to take one sample of 100 disbursements for the entireyear, so she selected 100 random numbers in the sequence 43921 to 55920. She audited the80 checks in the sample that were issued before September 30, and she held the other 20randomly selected check numbers for later use. She found no deviations in the sample of 80,a finding that, in the circumstances,…arrow_forwardIn your audit of Ginko Company, you have received a cash confirmation and a cutoff statement from the bank on Ginko’s one bank account. Prepare a list of substantive procedures for Ginko’s casharrow_forwardAn auditor is likely to perform each of the below procedures to obtain evidence regarding the potential understatement of accounts payable at year-end (i.e., the Completeness assertion) except… Question options: Inspect purchase orders and receiving reports for accounts payable recorded at year-end. Inspect the open invoice file for invoices to be paid after year-end. All options describe procedures that can be used to identify a potential understatement of accounts payable. Analyze cash disbursements made during the first few weeks of the subsequent year and inspect supporting documentation for each disbursement.arrow_forward
- You are auditing the Digos People’s Cooperative with a substantial annual sales, all of which are billed and collected locally. During your preliminary review of internal control, you discover the following procedures for handling cash receipts: Cash collections on over-the-counter and COD sales are received by the cashier from the customer or from the delivery service. Upon receiving cash, the cashier stamps the sales ticket “paid” and files a copy. The only record of COD sales is a copy of the sales ticket, which is given to the cashier to hold until cash is received from the delivery service. Mail is opened by the credit manager’s secretary, and remittances are given to the credit manager for review. The credit manager then places the remittances in a try on the cashier’s desk. At the time of the daily deposit – called “deposit cutoff time” – the cashier delivers the checks and currencies to the assistant credit manager, who prepares remittance lists and the bank deposit, and…arrow_forwardIn relation to your audit of the cash in bank of your client, Meg Company, the following information were gathered: • As of May 31, 2016, the book balance is P20,000 and the bank balance is P18,000.• The deposit in transit for May is P10,000; for June, P15,000.• The outstanding checks for May amount to P2,000 and the outstanding checks for June total to P5,000.• Credit memo for May pertain to a collection for a note totalling to P8,000; while for June, the credit memo is P30,000 pertaining to a bankloan.• Debit memos total to P500 for May and P2,000 for June.• A May book disbursement for P1,500 was not recorded. The correction was made in June.• A June collection for P4,500 was not recorded. No correction was made.• Bank errors for June are as follows: a deposit of P10,200 made by the entity was erroneously omitted; and a disbursement made by yourclient for P3,000 was erroneously debited to the account of MIG Company. No corrections were made during the month.• June book debits –…arrow_forwardIn relation to your audit of the cash in bank of your client, Meg Company, the following information were gathered: • As of May 31, 2016, the book balance is P20,000 and the bank balance is P18,000.• The deposit in transit for May is P10,000; for June, P15,000.• The outstanding checks for May amount to P2,000 and the outstanding checks for June total to P5,000.• Credit memo for May pertain to a collection for a note totalling to P8,000; while for June, the credit memo is P30,000 pertaining to a bankloan.• Debit memos total to P500 for May and P2,000 for June.• A May book disbursement for P1,500 was not recorded. The correction was made in June.• A June collection for P4,500 was not recorded. No correction was made.• Bank errors for June are as follows: a deposit of P10,200 made by the entity was erroneously omitted; and a disbursement made by yourclient for P3,000 was erroneously debited to the account of MIG Company. No corrections were made during the month.• June book debits –…arrow_forward
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