Question

In: Accounting

You are auditing the accounts of Jack Cooks Pty Ltd, a small printing firm in regional...

You are auditing the accounts of Jack Cooks Pty Ltd, a small printing firm in regional Victoria. During the year one of the owners contributed cash and other private assets to the business, with the following general journal bringing them to account in the books:

DR Cash 7,800

DR Motor Vehicle 45,000

DR Computer 1,500

DR Printer 1,250

CR Capital 55,550 (Contribution by owner)

Required: Explain in detail one substantive test (including the source document as applicable) for each of the following, in relation to the above journal entry:

The existence of the cash;

The rights and obligations of the motor vehicle;

The existence of the computer;

The valuation and allocation of the printer;

The valuation and allocation of the capital.

Solutions

Expert Solution

  1. The existence of the cash: The auditor can use the audit procedure of external confimration. He can directly pen down to confirm the cash balance with the banks and thus get evidence of its existence.
  2. Rights and obligations of the motor vehicle: The auditor should verify the documents pertaining to ownership and registration of the motor vehicle. Also check whether any obligation ie liabilities exists against the asset. This can be done by verifying documents of hypothecation, pledge, mortgage, etc if any
  3. Existence of computer: The auditor can obtain records of the asset ie computer and confirm the existence by physically verifying it's presence in the ogrnaisation.
  4. Valuation and allocation of printer: The auditor must compare the amount at which the printer is recorded with the market price for similar printer considering its life and usage.
  5. Valuation and allocation of capital: The auditor must verify if each item introduced to business by proprietor have been properly valued. Also any subsequent deposits and withdrawals have to be verified. Share

Related Solutions

You are auditing the accounts of Chavez Ramos Pty Ltd, a small manufacturing firm in the...
You are auditing the accounts of Chavez Ramos Pty Ltd, a small manufacturing firm in the eastern suburbs of Melbourne. During the year one of the owners contributed cash and other private assets from her home office to the business, with the following general journal bringing them to account in the books: Dr/Cr Account Debit Credit DR Cash 5,500 DR Equipment 10,000 DR Computer 1,250 DR Printer 1,000 CR Capital 17,750 (Contribution by owner) Required: Explain in detail one substantive...
You are currently auditing Speed Pty Ltd (Speed), a subsidiary of Tech Ltd (Tech). Speed is...
You are currently auditing Speed Pty Ltd (Speed), a subsidiary of Tech Ltd (Tech). Speed is an internet service provider that provides free internet access to its subscribers. In return, subscribers agree to provide their name, address and other details to Speed for the purpose of on-selling this information to various marketing firms. When Speed was established two years ago, its business plan stated that it would need 25,000 subscribers in order to break even. Speed has experienced demand far...
RJ Transport Pty Ltd has a long-term contract with PKR Small Goods Pty Ltd to deliver...
RJ Transport Pty Ltd has a long-term contract with PKR Small Goods Pty Ltd to deliver PKR’s products to supermarkets and wholesalers across Australia. In light of PKR’s expansion plans, the board at SRJ are looking to increase the number of delivery trucks and refrigerated trailers making up their fleet. One of the ideas put forward by the finance manager at SRJ is for the firm to look at leasing the trucks and trailers rather than purchasing them. Having never...
Your firm is the external auditor of Southwood Trading Ltd and you are auditing the financial...
Your firm is the external auditor of Southwood Trading Ltd and you are auditing the financial statements for the year ended 30th June 2016. Southwood Trading has a turnover of $25 million and trade debtors at 30th June 2009 were $5.2million. The engagement partner has asked you to consider the relative reliability of evidence from third parties and certain matters relating to a debtor’s circularization. In relation to requirement b)(ii) below , the partners has explained that judgment would be...
Assume that you are a junior auditor in a small auditing firm. You have been working...
Assume that you are a junior auditor in a small auditing firm. You have been working with them for one year now. One senior auditor has been on sick leave for one week already and still has no sign of coming back to work. You have been told by the audit manager that you must complete some complicated bank reconciliation work which the senior auditor should have done but she became sick. The due date given by the manager seems...
You are auditing the financial statements of the ATLAS Company, a small manufacturing firm that has...
You are auditing the financial statements of the ATLAS Company, a small manufacturing firm that has been your client for many years. Because you were busy working on another engagement, you sent a second-year accountant to begin the audit, with the suggestion that he start with accounts receivable. Using the prior year’s working papers as a guide, the auditor prepared a trial balance of the accounts, aged them, prepared and mailed positive confirmation requests, examined underlying support for charges and...
Suppose you work as an assistant accountant for an Accounting firm called Maan pty ltd, an...
Suppose you work as an assistant accountant for an Accounting firm called Maan pty ltd, an accounting firm, firm has many clients. Firm is involved with many accounting functions such Bookkeeping, tax, BAS, GST and other requirements. One of their client Marry came to you after July 2015 to lodge her tax returns. Mary has provided you the following information. Read this information carefully and answer below tasks. You must answer all tasks to get satisfactory performance in this assessment...
You have been provided with the following information for a small private company, Formosa Pty Ltd,...
You have been provided with the following information for a small private company, Formosa Pty Ltd, whose competitors are predominately large public companies. 2017 2018 2019 Industry average 2019 Net profit margin 8.2% 7.5% 6.8% 8.0% Return on equity 13.1% 12.3% 11.1% 13.5% Current ratio 1.8 2.1 2.4 2.0 Quick ratio 1.2 1.1 0.9 1.2 Receivables turnover 12.2 12.6 13.0 13.0 Inventory turnover 4.7 4.5 4.2 4.8 REQUIRED: Comment on the trend of each of the six ratios for Formosa...
DumDum Pty Ltd is a successful IT company. You are the IT Manager of DumDum Pty...
DumDum Pty Ltd is a successful IT company. You are the IT Manager of DumDum Pty Ltd. How is your company addressing cybersecurity policies and procedures in such a scenario? Will you make it a part of your Integrated Safety Management (ISM) and Quality Assurance (QA) System? Describe what your cybersecurity response plan includes e.g. Initial action, Response, Media crisis, support vendors in such a case scenario. Cite your sources.
Matt’s Landscaping Pty Ltd is registered for GST purposes. It accounts for GST on the accruals...
Matt’s Landscaping Pty Ltd is registered for GST purposes. It accounts for GST on the accruals basis and submits its Business Activity Statements monthly. Assume that all amounts in the question include GST when applicable. The business operates from Brisbane’s north-side and its main business is to design and establish new gardens at shopping centres and office parks, and to provide ongoing garden maintenance services to clients. During October 2018, Matt’s Landscaping Pty Ltd was involved in the following transactions:...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT