QUESTION The following misstatements are included in the accounting records of a manufacturing company. For each...

QUESTION
The following misstatements are included in the accounting records of a manufacturing company.
For each misstatement classify each misstatement as either a fraud or an error; give one or more controls
to prevent each error/fraud from occurring, and identify the audit evidence to uncover each error/fraud.

Misstatements	Classify as fraud or error	Give one or more controls to prevent each error/fraud from occurring	Identify the audit evidence to uncover each error/fraud
A sales invoice was incorrectly recorded by $1000
Cash paid on accounts receivable was stolen by the mail clerk when the mail was opened
Cash paid on accounts receivable that had been pre-listed by a secretary was stolen by the book-keeper who records cash receipts and accounts receivable. He failed to record the transactions.
A shipment to a customer was not billed because of the loss of the bill of lading
A sale to a residential customer was unintentionally classified as a commercial sale

Expert Solution

Misstatements	Classify as fraud or error	Give one or more controls to prevent each error/fraud from occurring	Identify the audit evidence to uncover each error/fraud
A sales invoice was incorrectly	Error	Sales invoice entry should be approved by a separate person	Checking sales day book and sales invoices
recorded by $1000
Cash paid on accounts receivable	Fraud	Inform customers that cash should be deposited with the cash receiving employee and a cash receipt should be obtained.	Customer confirmation
was stolen by the mail clerk when
the mail was opened
Cash paid on accounts receivable	Fraud	The cash receiver and book keeper should be separate person.Supervisor to match cash receipts and book keeping entry	Checking of cash receipt of cashier and book entry
that had been pre-listed by a secretary was stolen by the book-keeper who records cash receipts and accounts receivable. He failed to record the transactions.
A shipment to a customer was not	Error	Billings should be reconciled with shipping	Checking shipment with billing
billed because of the loss of the
bill of lading
A sale to a residential customer	Error	Sales entries to be approved by supervisor
was unintentionally classified as
a commercial sale

ekkarill92 answered 1 year ago

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