Auditing And Assurance Services
17th Edition
ISBN: 9780134897431
Author: ARENS, Alvin A.
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 21, Problem 25DQP
a.
To determine
Indicate the issues the auditor should consider when determining which locations to visit to physically observe the client’s inventory count.
.b.
To determine
Indicate the locations to visit.
c.
To determine
Indicate the type of inventory that create potential risks of material misstatements in the inventory balances.
d.
To determine
Indicate the auditor identification of the risks
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
The A-to-Z Office Supply Company
Christine Yamaguchi is the manager of the A-to-Z Office Supply Company in Charlotte. The company attempts to gain an advantage over its competitors by providing quality customer service, which includes prompt delivery of orders by truck or van and always being able to meet customer demand from its stock. To achieve this degree of customer service, A-to-Z must stock a large volume of items on a daily basis at a central warehouse and at three retail stores in the city and suburbs. Christine maintains these inventory levels by borrowing cash on a daily basis from the First Piedmont Bank. She estimates that for the coming fiscal year, the company’s demand for cash to pay for inventory will be $17,000 per day for 305 working days. Any money she borrows during the year must be repaid with interest by the end of the year. The annual interest rate currently charged by the bank is 9%. Any time Christine takes out a loan to purchase inventory, the bank charges…
Fruity Co is a distributors of fresh good and vegetables. It currently has 15 warehouses in the US from which it supplies produce to grocery stores. Each warehouse has an average inventory level of 3.88 million $. Due to advances in transportation services and infrastructure, management believes that if they reduce the number of warehouses to 10, they would still be able to provide timely replenishment to the grocery stores.
What would be the total inventory in the system in millions of dollars, if inventory was consolidated from the 15 warehouses to only 10 warehouses? (Enter your answer in millions of dollars. E.g. if you get 30.24 million $ simply enter 30.24 without the million$ sign. Round your answer to 2 decimal places.)
Carlton's Pizzas is a chain of pizza stores. Pizzas are made fresh in-store, and then delivered to customers by a fleet of drivers. The senior management team has identified the strategic priorities for the business as on-time delivery and product quality.
i) If the company is successful in achieving challenging targets for these performance measures, will it also necessarily achieve high profitability? And For each of the strategic priorities, suggest three performance measures.
Chapter 21 Solutions
Auditing And Assurance Services
Ch. 21 - Prob. 1RQCh. 21 - Prob. 2RQCh. 21 - Prob. 3RQCh. 21 - Prob. 4RQCh. 21 - Prob. 5RQCh. 21 - Prob. 6RQCh. 21 - Prob. 7RQCh. 21 - Prob. 8RQCh. 21 - Prob. 9RQCh. 21 - Prob. 10RQ
Ch. 21 - Prob. 11RQCh. 21 - Each employee of the Gedding Manufacturing Co., a...Ch. 21 - Prob. 13.1MCQCh. 21 - Prob. 13.2MCQCh. 21 - Prob. 13.3MCQCh. 21 - Prob. 14.1MCQCh. 21 - Prob. 14.2MCQCh. 21 - Prob. 14.3MCQCh. 21 - Prob. 15.1MCQCh. 21 - Prob. 15.2MCQCh. 21 - Prob. 15.3MCQCh. 21 - Prob. 16DQPCh. 21 - Prob. 17DQPCh. 21 - Prob. 18DQPCh. 21 - Prob. 19DQPCh. 21 - Prob. 20DQPCh. 21 - Prob. 21DQPCh. 21 - Prob. 22DQPCh. 21 - Prob. 23DQPCh. 21 - Prob. 24DQPCh. 21 - Prob. 25DQPCh. 21 - Prob. 26DQPCh. 21 - Prob. 27DQPCh. 21 - Prob. 28DQPCh. 21 - Prob. 29DQPCh. 21 - Prob. 30C
Knowledge Booster
Similar questions
- Audio Visual Corporation (AVC) manufactures and sells visual display equipment. Headquartered in Boston, it has seven sales offices with nearby warehouses that carry its inventory of new equipment and replacement parts. AVC has a departmentalized manufacturing plant with assembly, maintenance, engineering, scheduling, and cost accounting departments as well as several component parts departments. When management decided to upgrade its AIS, they installed a mainframe at headquarters and local area networks at each sales office. The IS manager and four systems analysts were hired shortly before they integrated the new computer and the existing AIS. The other IS employees have been with the company for years. During its early years, AVC had a centralized decision-making organization. Top management formulated all plans and directed all operations. As the company expanded, decision making was decentralized, although data processing was highly centralized. Departments coordinated their…arrow_forwardThe Mega Supply Corporation has three divisions: Commercial Products, Consumer Products, and Corporate Offices, which are located in Hatfield, South Carolina; Palo Alto, California; and Tulsa, Oklahoma, respectively. The Commercial Products division deals exclusively in sales of industrial products and supplies to business organizations. The Consumer Products division sells nonindustrial products to private consumers. Both divisions have dedicated inventory warehouses at their respective locations in Hatfield and Palo Alto. Because of the dissimilar nature of the commercial and consumer division product lines, they do not share customers or vendors. Currently Mega Supply uses a centralized database, which is located at their Corporate Division in Tulsa. Some relevant database tables and attributes are presented in the figure designated Problem 1. When customers contact their respective sales division, the sales clerk logs into the corporate database, checks credit, determines product availability, and creates a sales invoice. The corporate office typically bills the customer within 3 or 4 days and extends terms of net 30. Inventory control, AR processing, cash receipts, purchases from vendors and AP processing, and cash disbursements are performed by the corporate office. Due to Megas rapid growth, the company has seen a significant increase in sales and purchase transactions, which has resulted in excessive delays in processing transactions from the central database. Since customer service, including rapid response to customer inquiries and sales order processing, is a cornerstone of Megas business model, these delays are unacceptable. Required Mega wants to improve response time by distributing some parts of the corporate database while keeping other parts of it centralized. (A) Develop a schema for distributing Mega Supply Corporations database. Add new tables and attributes as needed but limit the schema to the tables needed to support sales, cash receipts, purchases/AP, and cash disbursements. In your schema, indicate whether tables are centralized, replicated, or partitioned. (B) Explain how the new system will operate.arrow_forwardEast Coast Trucking provides service from Boston to Miami using regional offices located in Boston, New York, Philadelphia, Baltimore, Washington, Richmond, Raleigh, Florence, Savannah, Jacksonville, and Tampa. The number of miles between the regional offices is provided in the following table: The companys expansion plans involve constructing service facilities in some of the cities where regional offices are located. Each regional office must be within 400 miles of a service facility. For instance, if a service facility is constructed in Richmond, it can provide service to regional offices located in New York, Philadelphia, Baltimore, Washington, Richmond, Raleigh, and Florence. Management would like to determine the minimum number of service facilities needed and where they should be located. a. Formulate an integer linear program that can be used to determine the minimum number of service facilities needed and their locations. b. Solve the integer linear program formulated in part (a). How many service facilities are required, and where should they be located? c. Suppose that each service facility can provide service only to regional offices within 300 miles. Re-solve the integer linear program with the 300-mile requirement. How many service facilities are required and where should they be located?arrow_forward
- Biotechtron, Inc., has two research laboratories in the Southwest, one in Yuma, Arizona, and the other in Bernalillo, New Mexico. The owner of Biotechtron centralized the legal services function in the Yuma office and had both laboratories send any legal questions or issues to the Yuma office. The legal services support center has budgeted fixed costs of 160,000 per year and a budgeted variable rate of 65 per hour of professional time. The normal usage of the legal services center is 2,600 hours per year for the Yuma office and 1,400 hours per year for the Bernalillo office. This corresponds to the expected usage for the coming year. Required: 1. Determine the amount of legal services support center costs that should be assigned to each office. 2. Since the offices produce services, not tangible products, what purpose is served by allocating the budgeted costs? 3. Now, assume that during the year, the legal services center incurred actual fixed costs of 163,000 and actual variable costs of 272,400. It delivered 4,180 hours of professional time2,580 hours to Yuma and 1,600 hours to Bernalillo. Determine the amount of the legal services centers costs that should be allocated to each office. Explain the purposes of this allocation. 4. Did the costs allocated differ from the costs incurred by the legal services center? If so, why?arrow_forwardPosavek is a wholesale supplier of building supplies building contractors, hardware stores, and home-improvement centers in the Boston metropolitan area. Over the years, Posavek has expanded its operations to serve customers across the nation and now employs over 200 people as technical representatives, buyers, warehouse workers, and sales and office staff. Most recently, Posavek has experienced fierce competition from the large online discount stores. In addition, the company is suffering from operational inefficiencies related to its archaic information system. Posavek revenue cycle procedures are described in the following paragraphs. Revenue Cycle Posaveks sales department representatives receive orders via traditional mail, e-mail, telephone, and the occasional walk-in customer. Because Posavek is a wholesaler, the vast majority of its business is conducted on a credit basis. The process begins in the sales department, where the sales clerk enters the customers order into the centralized computer sales order system. The computer and file server are housed in Posaveks small data processing department. If the customer has done business with Posavek in the past, his or her data are already on file. If the customer is a first-time buyer, however, the clerk creates a new record in the customer account file. The system then creates a record of the transaction in the open sales order file. When the order is entered, an electronic copy of it is sent to the customers e-mail address as confirmation. A clerk in the warehouse department periodically reviews the open sales order file from a terminal and prints two copies of a stock release document for each new sale, which he uses to pick the items sold from the shelves. The warehouse clerk sends one copy of the stock release to the sales department and the second copy, along with the goods, to the shipping department. The warehouse clerk then updates the inventory subsidiary file to reflect the items and quantities shipped. Upon receipt of the stock release document, the sales clerk accesses the open sales order file from a terminal, closes the sales order, and files the stock release document in the sales department. The sales order system automatically posts these transactions to the sales, inventory control, and cost-of-goods-sold accounts in the general ledger file. Upon receipt of the goods and the stock release, the shipping department clerk prepares the goods for shipment to the customer. The clerk prepares three copies of the bill of lading. Two of these go with the goods to the carrier and the third, along with the stock release document, is filed in the shipping department. The billing department clerk reviews the closed sales orders from a terminal and prepares two copies of the sales invoice. One copy is mailed to the customer, and the other is filed in the billing department. The clerk then creates a new record in the accounts receivable subsidiary file. The sales order system automatically updates the accounts receivable control account in the general ledger file. CASH RECEIPTS PROCEDURES Mail room clerks open customer cash receipts, reviews the check and remittance advices for completeness, and prepares two copies of a remittance list. One copy is sent with the checks to the cash receipts department. The second copy of the remittance advices are sent to the billing department. When the cash receipts clerk receives the checks and remittance list, he verifies the checks received against those on the remittance list and signs the checks For Deposit Only. Once the checks are endorsed, he records the receipts in the cash receipts journal from his terminal. The clerk then fills out a deposit slip and deposits the checks in the bank. Upon receipt of the remittances, the billing department clerk records the amounts in the accounts receivable subsidiary ledger from the department terminal. The system automatically updates the AR control account in the general ledger Posavek has hired your public accounting firm to review its sales order procedures for internal control compliance and to make recommendations for changes. Required a. Create a data flow diagram of the current system. b. Create a system flowchart of the existing system. c. Analyze the physical internal control weaknesses in the system. d. (Optional) Prepare a system flowchart of a redesigned computer-based system that resolves the control weaknesses that you identified. Explain your solution.arrow_forwardOllie Mace is the controller of SDC, an automotive parts manufacturing firm. Its four major operating divisions are heat treating, extruding, small parts stamping, and screening. Last year's sales from cach division ranged from $ 150,000 to $ 3 million. Each division is physically and independent, except for the constant surveillance - 2.2 I according to the needs and abilities of its ac- counts of Sam Dilley, the firms 7 examples The AIS for each division evaluates to have responsibility for overall financial management. Dilley wants Mace to improve the AIS before he retires in a few years counting staff. Mace is the first redesign of the ta monitor division performance. Mace decides so that it will be limited to the following features: financial reporting is uniform, timely, and accurate reports of business activity. • Ir should give the same uniform across divisions and be completed by the fifth day of the following month to provide enough time to take corrective actions to af-…arrow_forward
- consumer focus is a marketing research firm that organizes focus groups for consumer – product companies. Each focus group has eight individuals who are paid $50 per session to provide comments om new products. these focus groups meet in hotels and are led by a trained, independent, marketing specialists hired by consumer focus. Each specialist is paid a fixed retainer to conduct a minimum number of sessions and a per sessions fee of $2000. A consumer focus staff member attends each session to ensure that all the logistical aspects run smoothly.Required: - Classify each of the following cost items as:a. Direct or indirect (D or I) costs with respect to each individual focus group.b. Variable or fixed (V or F) costs with respect to how the total costs of consumer focus change as the number of focus groups conducted changes.( if in doubt, select on the basis of whether the total costs will change substantially if there is a large change in the number of groups conducted.)You will have…arrow_forwardSafa traders is a wholesale business unit based in Salala. The company is dealing with disposable tableware in large quantities. The business has a separate stores department which maintains a full-fledged stores register which will be updated on a day to day basis with all the stock movements. At the end of the previous month, the company management has called for a strategic meeting to discuss the future plans to improve the performance of the business. One of the partner has raised his concern about the increasing total cost of the business and he suggested to use any appropriate Inventory control technique to reduce the overall cost of the company. The management accountant is considering to implement EOQ purchase in the business to reduce the overall cost of the company. Upon request, the stores department has provided with the following information to estimate the EOQ. Annual demand for the tableware is given as 5000 Units and the business has to spend OMR 20 per order in order…arrow_forwardKim Distribution Services (KDS) distributes food purchased in bulk to small retailers. The firm is divided into two divisions: Purchasing and Distribution. Purchasing is responsible for ordering goods from the manufacturer, receiving them, and then moving them to the appropriate location in the warehouse. Distribution is responsible for taking orders from retailers, picking the products from the warehouse for the orders, and packaging the orders for shipment. KDS has a policy of filling every order on the day of the order. If the firm is out of a particular item, it will ship a partial order and complete the order when the item is back in stock. Occasionally, an order will not have to be packaged if the retailer chooses to take delivery at the KDS loading dock. Distribution has 15 employees who are responsible for the activities, and all 15 are trained to handle any of the three tasks. Each of these employees works 40 hours per week for 50 weeks. There is an allowance of 15 percent…arrow_forward
- Kim Distribution Services (KDS) distributes food purchased in bulk to small retailers. The firm is divided into two divisions: Purchasing and Distribution. Purchasing is responsible for ordering goods from the manufacturer, receiving them, and then moving them to the appropriate location in the warehouse. Distribution is responsible for taking orders from retailers, picking the products from the warehouse for the orders, and packaging the orders for shipment. KDS has a policy of filling every order on the day of the order. If the firm is out of a particular item, it will ship a partial order and complete the order when the item is back in stock. Occasionally, an order will not have to be packaged if the retailer chooses to take delivery at the KDS loading dock. Distribution has 15 employees who are responsible for the activities, and all 15 are trained to handle any of the three tasks. Each of these employees works 40 hours per week for 50 weeks. There is an allowance of 15 percent…arrow_forwardASA Tours operates a network of offices around the globe specializing in local tours given by local residents and academics. Depending on the year, it operates at between 60 and 70 percent of capacity, which consists of locals who meet the criteria required by ASA. ASA operates three types of tours. Web-based tours consist of live-stream broadcasts with a limit of 15 participants. Group tours consist of small groups of no more than eight people. Finally. there are individual tours, which are personalized tours for no more than six people. Segmented income statements for a typical month appear as follows: Routes Web-Based Group Individual Sales $ 107,800 $ 275,600 $ 181,600 Variable costs 23,600 216,800 101,800 Fixed costs allocated to tours 35,396 89,092 59,012 Operating profit (loss) $ 48,804 $ (30,292) $ 20,788 ASA is considering dropping the group tours. If these tours are dropped, the revenue associated with the tours would be lost and the related variable costs…arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
Essentials of Business Analytics (MindTap Course ...StatisticsISBN:9781305627734Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. AndersonPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Essentials of Business Analytics (MindTap Course ...
Statistics
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,