EP AUDITING+ASSURANCE...-MYACCT.LAB
16th Edition
ISBN: 9780134148656
Author: ARENS
Publisher: PEARSON CO
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Chapter 7, Problem 35DQP
You are auditing payroll for the Morehead Technologies company for the year ended October 31, 2016. Included next are amounts from the client’s
You have obtained the following information to help you perform preliminary analytical procedures for the payroll account balances.
- 1. There has been a significant increase in the demand for Morehead’s products. The increase in sales was due to both an increase in the average selling price of four percent and an increase in units sold that resulted from the increased demand and an increased marketing effort.
- 2. Even though sales volume increased, there was no addition of executives, factory supervisors, or office personnel.
- 3. All employees including executives, but excluding commission salespeople, received a three percent salary increase starting November 1, 2015. Commission salespeople receive their increased compensation through the increase in sales.
- 4. The increased number of factory hourly employees was accomplished by recalling employees that had been laid off. They receive the same wage rate as existing employees. Morehead does not permit overtime.
- 5. Commission salespeople receive a five percent commission on all sales on which a commission is given. Approximately 75 percent of sales earn sales commission. The other 25 percent are “call-ins,” for which no commission is given. Commissions are paid in the month following the month they are earned.
Required
- a. Use the final balances for the prior year included above and the information in items 1 through 5 to develop an expected value for each account, except sales.
- b. Calculate the difference between your expectation and the client’s recorded amount as a percentage using the formula (expected value – recorded amount)/expected value.
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You are auditing payroll for the Vineyard Technologies company for the year ended October 31, 2019. Included next are amounts from the client's trial balance, along with comparative audited information for the prior year.
(Click the icon to view the amounts from the trial balance.)
i (Click the icon to view the additional information.)
Read the requirements.
(Note 1: When computing the expected value of factory hourly payroll, you must take into consideration both the 6% wage increase and the 13% increase in the number of units produced and sold. Note 2: Use the increase in the 10/31/2019 preliminary sales balance over the 10/31/2018 audited sales balance to
determine the expected value for sales commissions on 10/31/2019.)
X
Executive salaries
Factory hourly payroll (see Note 1)
Factory supervisors' salaries
Office salaries
Sales commissions (see Note 2)
(1)
Preliminary
Balance
10/31/2019
630,599
11,004,992
759,699
2,713,957
2,827,321
Requirement a.
(2)
Expected Value
10/31/2019…
You are auditing payroll for the Morehead Technologies company for the year ended October 31, 2019. Included next are amounts from the client's trial balance, along with comparative audited information for the prior year.
(Click the icon to view the amounts from the trial balance.)
(Click the icon to view the additional information.)
Read the requirements.
(Note 1: When computing the expected value of factory hourly payroll, you must take into consideration both the 3% wage increase and the 8% increase in the number of units produced and sold. Note 2: Use the increase in the 10/31/2019 preliminary sales balance over the 10/31/2018 audited sales balance to
determine the expected value for sales commissions on 10/31/2019.)
Executive salaries
Factory hourly payroll (see Note 1)
Factory supervisors' salaries
Office salaries
Sales commissions (see Note 2)
Preliminary
Balance
10/31/2019
615,970
11,476,319
810,588
2,055,302
2,367,962
Requirement a.
(2)
Expected Value
10/31/2019
Requirement b.…
An auditor noted that client sales increased 10 percent for the year. At the same time, Cost of Goods Sold as a percentage of sales had decreased from 45 percent to 40 percent and year-end accounts receivable had increased by 8 percent.
Based on this information, the auditor interviewed the sales manager, who stated that the increase in sales without a corresponding increase in cost of goods sold was due to a price increase enacted by the company during the year. How would the auditor test the sales manager’s representation?a. Perform additional inquiries with sales personnel.b. Obtain copies of all price lists in use during the year and vouch the prices to sales invoices.c. Send confirmations asking customers about unit prices paid for product.d. Vouch vender invoices to payments made after year-end.
Chapter 7 Solutions
EP AUDITING+ASSURANCE...-MYACCT.LAB
Ch. 7 - Prob. 1RQCh. 7 - Prob. 2RQCh. 7 - Prob. 3RQCh. 7 - Prob. 4RQCh. 7 - Prob. 5RQCh. 7 - Prob. 6RQCh. 7 - Prob. 7RQCh. 7 - Prob. 8RQCh. 7 - Prob. 9RQCh. 7 - Prob. 10RQ
Ch. 7 - Prob. 11RQCh. 7 - Prob. 12RQCh. 7 - Describe the liquidity activity ratios and explain...Ch. 7 - Prob. 14RQCh. 7 - Prob. 15RQCh. 7 - Prob. 16RQCh. 7 - Prob. 17RQCh. 7 - Prob. 18RQCh. 7 - Define what is meant by a tick mark. What is its...Ch. 7 - Prob. 20RQCh. 7 - Prob. 21.1MCQCh. 7 - Prob. 21.2MCQCh. 7 - Prob. 21.3MCQCh. 7 - Prob. 22.1MCQCh. 7 - Prob. 22.2MCQCh. 7 - Prob. 22.3MCQCh. 7 - Prob. 23.1MCQCh. 7 - Prob. 23.2MCQCh. 7 - Prob. 23.3MCQCh. 7 - Prob. 24.1MCQCh. 7 - Prob. 24.2MCQCh. 7 - Prob. 24.3MCQCh. 7 - Prob. 25DQPCh. 7 - Prob. 26DQPCh. 7 - Prob. 27DQPCh. 7 - Prob. 28DQPCh. 7 - Prob. 29DQPCh. 7 - Prob. 30DQPCh. 7 - Following are 10 audit procedures with words...Ch. 7 - Prob. 32DQPCh. 7 - Prob. 33DQPCh. 7 - Prob. 34DQPCh. 7 - You are auditing payroll for the Morehead...Ch. 7 - Prob. 36DQPCh. 7 - Prob. 38C
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