Question

The following are misstatements that have occurred in Fresh Foods Grocery​ Store, a retail and wholesale grocery​ company:

1.	On the last day of the​ year, a truckload of beef was set aside for shipment but was not shipped. Because it was still on hand the inventory was counted. The shipping document was dated the last day of the​ year, so it was also included as a​ current ­year sale.
2.	The incorrect price was used on sales invoices for billing shipments to customers because the wrong price was entered into the computer master file of prices.
3.	A vendor invoice was paid even though no merchandise was ever received. The accounts payable software application does not require the input of a valid receiving report number before payment can be made.
4.	Employees in the receiving department took sides of beef for their personal use. When a shipment of meat was​ received, the receiving department filled out a receiving report and forwarded it to the accounting department for the amount of goods actually received. At that​ time, two sides of beef were put in an​ employee's pickup truck rather than in the storage freezer.
5.	An accounts payable clerk processed payments to himself by adding a fictitious vendor address to the approved vendor master file.
6.	During the physical count of inventory of the retail​ grocery, one counter wrote down the wrong description of several products and miscounted the quantity.
7.	A salesperson sold an entire carload of lamb at a price below cost because she did not know the cost of lamb had increased in the past week.
8.	A​ vendor's invoice was paid twice for the same shipment. The second payment arose because the vendor sent a duplicate copy of the original 2 weeks after the payment was due.

Read the requirements

A.	For each​ misstatement, identify one or more types of controls that were absent.
b.	For each​ misstatement, identify the​ transaction-related management assertions that have not been met.
c.	For each​ misstatement, suggest a control that may have prevented or detected the misstatement.

a. For each​ misstatement, identify one or more types of controls that were absent. ​(Each control may be used more than​ once.)

Controls Options

i.	Adequate separation of duties
ii.	Proper authorization of transactions and activities
iii.	Adequate documents and records
iv.	Physical control over assets and records
v.	Independent checks on performance

1.	On the last day of the year, a truckload of beef was set aside for shipment but was not
	shipped. Because it was still on hand the inventory was counted. The shipping
	document was dated the last day of the year, so it was also included as a
	current-year sale.
2.	The incorrect price was used on sales invoices for billing shipments to customers
	because the wrong price was entered into the computer master file of prices.
3.	A vendor invoice was paid even though no merchandise was ever received. The
	accounts payable software application does not require the input of a valid receiving
	report number before payment can be made.
4.	Employees in the receiving department took sides of beef for their personal use. When
	a shipment of meat was received, the receiving department filled out a receiving report
	and forwarded it to the accounting department for the amount of goods actually
	received. At that time, two sides of beef were put in an employee's pickup truck rather
	than in the storage freezer.
5.	An accounts payable clerk processed payments to himself by adding a fictitious vendor
	address to the approved vendor master file.
6.	During the physical count of inventory of the retail grocery, one counter wrote down
	the wrong description of several products and miscounted the quantity.

7.	A salesperson sold an entire carload of lamb at a price below cost because she did not
	know the cost of lamb had increased in the past week.
8.	A vendor's invoice was paid twice for the same shipment. The second payment arose
	because the vendor sent a duplicate copy of the original 2 weeks after the payment
	was due. b. For each​ misstatement, identify the​ transaction-related management assertions that have not been met. ​(Each transaction-related management assertions may be used more than​ once.)

Transaction - related Management Assertions

	i. Occurence ii. Completeness iii. Accuracy iv. Classification v. Cutoff
	Misstatements	Transaction related management
1.	On the last day of the year, a truckload of beef was set aside for shipment but was not
	shipped. Because it was still on hand the inventory was counted. The shipping
	document was dated the last day of the year, so it was also included as a
	current-year sale.
2.	The incorrect price was used on sales invoices for billing shipments to customers
	because the wrong price was entered into the computer master file of prices.
3.	A vendor invoice was paid even though no merchandise was ever received. The
	accounts payable software application does not require the input of a valid receiving
	report number before payment can be made.
4.	Employees in the receiving department took sides of beef for their personal use. When
	a shipment of meat was received, the receiving department filled out a receiving report
	and forwarded it to the accounting department for the amount of goods actually
	received. At that time, two sides of beef were put in an employee's pickup truck rather
	than in the storage freezer.
5.	An accounts payable clerk processed payments to himself by adding a fictitious vendor
	address to the approved vendor master file.
6.	During the physical count of inventory of the retail grocery, one counter wrote down
	the wrong description of several products and miscounted the quantity.

7.	On the last day of the year, a truckload of beef was set aside for shipment but was not
	shipped. Because it was still on hand the inventory was counted. The shipping
	document was dated the last day of the year, so it was also included as a
	current-year sale.
8.	An accounts payable clerk processed payments to himself by adding a fictitious vendor
	address to the approved vendor master file.

c. For each​ misstatement, suggest a control that may have prevented or detected the misstatement. ​(Use each letter corresponding to a control only once. Misstatements​ 4., 7., and 8. require two controls be​ selected.)

A.	Include a control in the accounts payable software that requires the input of a valid receiving report number before the software will process a payment on an accounts payable.
B.	Require a receiving report be attached to the​ vendor's invoice before a payment is made.
C.	Fence in the physical facilities and prohibit employees from parking inside the fencing.
D.	Carefully coordinate the physical count of inventory on the last day of the year with the recording of sales to make certain counted inventory has not been billed and billed inventory has not been counted.
E.	Make sure that the salesperson has a current price list.
F.	Require the accounting department to maintain perpetual inventory records and take physical counts of actual sides of beef periodically.
G.	Changes to the computer master file of prices are reviewed when the master file is updated.
H.	Require that payments only be made on original invoices.
I.	Restrict the accounts payable clerk from being able to make changes to the approved vendor master file. Only allow purchasing personnel to input changes to that master file.
J.	Counts by qualified personnel and independent checks on performance.
K.	Require independent approval of all​ transactions, including the​ price, before shipment is made.

			Control(s) to
	Misstatements		prevent or detect
1.	On the last day of the year, a truckload of beef was set aside for shipment but was not
	shipped. Because it was still on hand the inventory was counted. The shipping
	document was dated the last day of the year, so it was also included as a
	current-year sale.
2.	The incorrect price was used on sales invoices for billing shipments to customers
	because the wrong price was entered into the computer master file of prices.
3.	A vendor invoice was paid even though no merchandise was ever received. The
	accounts payable software application does not require the input of a valid receiving
	report number before payment can be made.
4.	Employees in the receiving department took sides of beef for their personal use. When
		a shipment of meat was received, the receiving department filled out a receiving report
		and forwarded it to the accounting department for the amount of goods actually
		received. At that time, two sides of beef were put in an employee's pickup truck rather
		than in the storage freezer.
5.		An accounts payable clerk processed payments to himself by adding a fictitious vendor
		address to the approved vendor master file.
6.		During the physical count of inventory of the retail grocery, one counter wrote down
		the wrong description of several products and miscounted the quantity.
7.		A salesperson sold an entire carload of lamb at a price below cost because she did not
		know the cost of lamb had increased in the past week.
8.		A vendor's invoice was paid twice for the same shipment. The second payment arose
		because the vendor sent a duplicate copy of the original 2 weeks after the payment
		was due.

Answer 1