Question

per company policy. 9-24 l!:IJ The auditor has provided a preliminary assessment of control risk of lo,v in the revenue cycle accounts of Acco, Inc. for each of the relevant assertions. The auditor selected a sample of sales transactions for control testing. Each of the following types of control or transaction- processing deficiencies uncovered in the sample was significant enough to cause the auditor to increase control risk assessment from lo,v to moderate. For each deficiency, labeled as (a) though (i), discuss the type of financia l statement misstatement that may result, the assertion(s) affected, and the effect on the nature, timing, and/or extent of related substantive tests. Consider each deficiency independently from the others. a. No evidence that price and quantity on the invoice ,vere compared ,vith the supporting documents b. Failure to approve customer credit before shipping the merchandise on open account c. Recording sales before they ,vere shipped d. Recording sales several days after they should have been recorded e. Recording sales several days before and several days after they should have been recorded f. Lack of customer orders; items ,vere shipped g. Lack of shipping documents; customer order ,vas found h. Incorrect invoice price i. Quantity shipped differed from the quantity billed

Answer 1

Solution:

a. Expecting manual chronicle of exchanges are being finished

Error : Value of cost and banks might be downplayed

Substantive methodology: Detailed vouching for buy receipt will be required with bigger example base.

b. Error : Value of arrangement of awful obligations might be downplayed

Substantive methodology : Large example for deals vouching will be required. Debtors maturing investigation with cross check with Standard techniques to confirm credits are affirmed or not.

c. According to IFRS-15 deal will be recorded just when control has been exchanged.

Error : Overstatement of income and indebted individuals

Substantive techniques : Detailed deals vouching will be required with bigger example base.Can be cross checked with dispatch enroll.

d. Error : Understatement of income and indebted individuals

Substantive techniques : Detailed deals vouching will be required just at the year end with bigger example base. Can be cross checked with dispatch enroll.

e. The two systems referenced in c and d above

f. Error : Overstatement of income and account holders (might be income exaggeration extortion for the executives motivating forces)

Substantive methodology : Detailed deals vouching will be required and to be cross confirmed with client orders with huge example base.

g. Error : Understatement of income and indebted individuals as it is conceivable that because of absence of transportation records exchanges were not booked.

Substantive strategies : Detailed deals vouching will be required with bigger example base. Deals booked can be cross checked with dispatch enlist.

h. Error : Understatement or Overstatement of income and indebted individuals relying on the cost taken lower or higher than real

Substantive systems : Detailed deals vouching will be required with bigger example base. Deals an incentive to be checked with organization's standard costs or menu costs.

I. Error : Understatement or Overstatement of income, indebted individuals and Inventory contingent on the amount taken his proprietor or higher than real

Substantive methodology : Detailed deals vouching will be required with bigger example base. Deals can be cross checked with dispatch enlist.