Question
In: Accounting
During your review of the audit field work completed by a new junior employee of the...
During your review of the audit field work completed by a new junior employee of the audit firm, John Smith, you have noted many areas which require additional review notes. John, who has just completed the interim audit of Taxon Ltd for the year ended 30 June 2019, has just performed testing of controls. When testing controls over payments made to related parties, there should be evidence of approval and sign-off by the chief financial officer (CFO). John selected a sample of payments made to related parties and vouched them back to the electronic funds transfer (EFT) forms to sight the CFO’s signature of approval. Based on a sample of ten payments, six had been approved by the CFO in writing. However, the remaining four EFT forms (for immaterial amounts) did not have the CFO’s signature, but John noted that the CFO had given verbal approval. John concluded that because all internal controls were working, the audit team could use analytical procedures alone to audit payments made to related parties.
Required: Based on the results of the testing of controls outlined above, determine whether John has arrived at the appropriate conclusion? (1 mark) Justify your answer by addressing the following areas: the risks associated with related party transactions, and the reliability of controls at Taxon Ltd.
Solutions
ekkarill92 answered 1 year agoRelated Solutions
During your review of the audit field work completed by a new junior employee of the...
During your review of the audit field work completed by a new
junior employee of the audit firm, John Smith, you have noted many
areas which require additional review notes. John, who has just
completed the interim audit of Taxon Ltd for the year ended 30 June
2019, has just performed testing of controls. When testing controls
over payments made to related parties, there should be evidence of
approval and sign-off by the chief financial officer (CFO). John
selected a...
During your review of the audit field work completed by a new junior employee of the...
During your review of the audit field work completed by a new
junior employee of the audit firm, John Smith, you have noted many
areas which require additional review notes. John, who has just
completed the interim audit of Taxon Ltd for the year ended 30 June
2019, has just performed testing of controls. When testing controls
over payments made to related parties, there should be evidence of
approval and sign-off by the chief financial officer (CFO). John
selected a...
During your review of the audit field work completed by a new junior employee of the...
During your review of the audit field work completed by a new
junior employee of the audit firm, John Smith, you have noted many
areas which require additional review notes. John, who has just
completed the interim audit of Taxon Ltd for the year ended 30 June
2019, has just performed testing of controls. When testing controls
over payments made to related parties, there should be evidence of
approval and sign-off by the chief financial officer (CFO). John
selected a...
During your review of the audit field work completed by a new junior employee of the...
During your review of the audit field work completed by a new
junior employee of the audit firm, John Smith, you have noted many
areas which require additional review notes. John, who has just
completed the interim audit of Taxon Ltd for the year ended 30 June
2019, has just performed testing of controls. When testing controls
over payments made to related parties, there should be evidence of
approval and sign-off by the chief financial officer (CFO). John
selected a...
During your review of the audit field work completed by a new junior employee of the...
During your review of the audit field work completed by a new
junior employee of the audit firm, John Smith, you have noted many
areas which require additional review notes. John, who has just
completed the interim audit of Taxon Ltd for the year ended 30 June
2019, has just performed testing of controls. When testing controls
over payments made to related parties, there should be evidence of
approval and sign-off by the chief financial officer (CFO). John
selected a...
During your review of the audit field work completed by a new junior employee of the...
During your review of the audit field work completed by a new
junior employee of the audit firm, John Smith, you have noted many
areas which require additional review notes. John, who has just
completed the interim audit of Taxon Ltd for the year ended 30 June
2019, has just performed testing of controls. When testing controls
over payments made to related parties, there should be evidence of
approval and sign-off by the chief financial officer (CFO). John
selected a...
During your review of the audit field work completed by a new junior employee of the audit firm, John Smith, you have noted many areas which require additional review notes.
During your review of the audit field work completed by a new junior employee of the audit firm, John Smith, you have noted many areas which require additional review notes. John, who has just completed the interim audit of Taxon Ltd for the year ended 30 June 2019, has just performed testing of controls. When testing controls over payments made to related parties, there should be evidence of approval and sign-off by the chief financial officer (CFO). John selected a...
You have completed the field work in connection with your audit of Alexander Corporation for the...
You have completed the field work in connection with your audit
of Alexander Corporation for the year ended December 31, 2017. The
balance sheet accounts at the beginning and end of the year are
shown below.
Dec. 31,
2017
Dec. 31,
2016
Increase or
(Decrease)
Cash
$277,900
$298,000
($20,100
)
Accounts receivable
469,424
353,000
116,424
Inventory
741,700
610,000
131,700
Prepaid expenses
12,000
8,000
4,000
Investment in subsidiary
110,500
0
110,500
Cash surrender value of life insurance
2,304
1,800
504
Machinery...
The audit team completed the field work on 22 July 2020. The audit report was signed...
The audit team completed the field work on 22 July 2020. The
audit report was signed on 5 August by Charles Kirby. The financial
statements were signed by the BoD on the same day, which was
subsequently released to shareholders on 12 August 2020. During the
review of subsequent events, you noted the following material
events:
1) Cook’s Furniture Ltd has purchased a property in Adelaide
Australia on 20 July 2020 for AUD 3,200,000 and intended to use it
as...
Problem 23-5 You have completed the field work in connection with your audit of Waterway Corporation...
Problem 23-5
You have completed the field work in connection with your audit
of Waterway Corporation for the year ended December 31, 2017. The
balance sheet accounts at the beginning and end of the year are
shown below.
Dec. 31,
2017
Dec. 31,
2016
Increase or
(Decrease)
Cash
$327,922
$351,640
($23,718
)
Accounts receivable
553,920
416,540
137,380
Inventory
875,206
719,800
155,406
Prepaid expenses
14,160
9,440
4,720
Investment in subsidiary
130,390
0
130,390
Cash surrender value of life insurance
2,719
2,124...
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