Week 2 Current Issue Summary and problem

THERE ARE TWO SMALL PART’S TO THIS SO SEPARATE ASSIGNMENTS

PART ONE


Write a 175- to 350-word summary.

Research a recent article on auditing cash, financial instruments, sales, or receivables.

Apply what you learn to your future or current job.

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PART TWO

Complete problem 23-20 on p. 745 of Auditing and Assurance Services: An Integrated Approach

Problem 23-20

DISCUSSION QUESTIONS AND PROBLEMS

23-20 (Objectives 23-3, 23-4) The following are misstatements that might be found in the client’s year-end cash balance (assume that the balance sheet date is June 30):

  • 1. The outstanding checks on the June 30 bank reconciliation were underfooted by $2,000.
  • 2. A loan from the bank on June 26 was credited directly to the client’s bank account. The loan was not entered as of June 30.
  • 3. A check was omitted from the outstanding check list on the June 30 bank reconciliation. It cleared the bank July 7.
  • 4. A check was omitted from the outstanding check list on the bank reconciliation. It cleared the bank September 6.
  • 5. Cash receipts collected on accounts receivable from July 1 to July 5 were included as June 29 and 30 cash receipts.
  • 6. A bank transfer recorded in the accounting records on July 1 was included as a deposit in transit on June 30.
  • 7. A check that was dated June 26 and disbursed in June was not recorded in the cash disbursements journal, but it was included as an outstanding check on June 30.

Required

  • a. Assuming that each of these misstatements was intentional (fraud), state the most likely motivation of the person responsible.
  • b. What control can be instituted for each fraud to reduce the likelihood of occurrence?
  • c. List an audit procedure that can be used to discover each fraud.

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