what are some audit strategies or procedures to address the risks of material misstatement regarding expenses and overstated revenue

True and false questions

1. Contribution margin plus variable cost will equal revenue?

2. Capital budgets are used for the budgeting of large expensive expenditures?

3. Ending inventory in a purchases budget is based on next months forecasted sales?

4. Only manufacturing companies can use job order cost accounting?

5. Unfavorable and favorable variances are both investigated?

6. Break-even is the point at which a company achieves its target profit?

7. Contribution margin and gross margin are the same thing?

8 A budget is a plan for the future in monetary terms?

9.Direct material costs are estimated in a job order cost accounting system?

10.Operating budgets result in the Balance Sheet?

11.Management accounting is for both insiders and outsiders?

12. A cash budget includes depreciation expense?

13.Fixed costs per unit will vary with volume?

14.Revenue variances are normally favorable and expense variances are normally unfavorable?

15.Financial budgets result in your Income Statement?

16.COGS budgets are the first budgets to be prepared?

17.In decision making reliable costs are those costs that make a difference in the future?

18.Beginning inventory is normally calculated as a % of next months forecasted sales?

19. Scrap value of your old machine is important in make or buy related decisions?

20.Flexible budgets replace the master budget?

2. When issuing revenue backed bonds, receipts from all issuing governments sources are pledged to pay the interest and principal back to the bond purchasers.

True/False ___________True________

Correction to make true

____________________________________________________________________________________

3. The theory of tax expenditures is what drives the rationale for investors to purchase State/local bonds of either type (general obligation/revenue backed)

True/False_______True___________

Correction to make true

___________________________________________________________________________________

4. The Federal American Recovery Act, signed into law by President Obama, provided a mechanism that achieved the goals of federal grant policy by correcting for externalities and providing for a macroeconomic stabilizing mechanism.

True/False ____True______________

Correction to make true

Between January 1 and December 31, 2018:

1. Accounts Receivable decrease by $200,000
2. Accounts Payable increase by $500,000
3. Gross Property, Plant, & Equipment increase by $8,500,000
4. Long Term Debt increases by $900,000

Assume no other changes

What is the Net Cash Flow?

3. Profit maximization using total cost and total revenue curves

Suppose Ana runs a small business that manufactures shirts. Assume that the market for shirts is a competitive market, and the market price is $20 per shirt.

The following graph shows Ana's total cost curve.

Use the blue points (circle symbol) to plot total revenue and the green points (triangle symbol) to plot profit for shirts quantities zero through seven (inclusive) that Ana produces.

Calculate Ana's marginal revenue and marginal cost for the first seven shirts she produces, and plot them on the following graph. Use the blue points (circle symbol) to plot marginal revenue and the orange points (square symbol) to plot marginal cost at each quantity.

Ana's profit is maximized when she producesshirts. When she does this, the marginal cost of the last shirt she produces is, which is (less or greater) than the price Ana receives for each shirt she sells. The marginal cost of producing an additional shirt (that is, one more shirt than would maximize her profit) is, which is (Greater or less) than the price Ana receives for each shirt she sells. Therefore, Ana's profit-maximizing quantity corresponds to the intersection of the   curves. Because Ana is a price taker, this last condition can also be written as   .

INCOME STATEMENT FOR NKUTO CORP.
2015
2016
2017
2018
Revenue
3,200,000
3,750,000
3,913,000
4,170,000
Cost of goods sold
1,920,000
2,025,000
2,110,000
2,095,500
Gross profit
1,280,000
1,725,000
1,803,000
2,074,500
Administrative overhead:
Legal staff wages
315,000
452,000
465,300
492,000
Telephone
118,000
134,000
148,200
134,000
Insurance
99,000
107,000
109,000
113,300
Travel costs
112,000
123,000
127,900
125,000
Consulting expenses
138,000
141,000
136,700
144,200
Permits and licenses
93,000
98,000
99,500
97,000
Total Administrative Expenses
875,000
1,055,000
1,086,600
1,105,500
Earnings Before Interest, Tax and Depreciation
405,000
670,000
716,400
969,000
Interest
32,000
29,000
33,100
34,200
Taxes
128,000
134,000
129,800
139,000
Depreciation
57,000
53,000
59,900
68,800
Net profit
188,000
454,000
493,600
727,000
Required:
Calculate and comment on the following:
(a) Gross profit margin for 2016
(b) Net profit margin 2017
(c) Gross profit margin for 2018
(d) Net profit margin for 2018
(e) What is your opinion for investors who have expressed interest to capitalize the firm?

(f) If the money owned to suppliers by Nkuto Corp. in 2015 happened to be ¢2,040, whereas purchases done on credit amounted to ¢28,950. Determine the organization’s Average Payment Period.

Distinguish point-of-sale systems from revenue cycles of manufacturing firms.
[15 marks]

b) Discuss the threat of unauthorized changes to the payroll master file and its
consequences.