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Foot the accounts receivable lead schedule and agree the balance to the general ledger.




ACCT 4543 Audit Evidence/Procedures Project (50 points);Objective: This project is designed to help students understand the link between financial statement assertions and audit evidence, and to develop a good understanding of the different types of audit evidence available to the auditor?including analytical procedures.;Part 1: Below is an audit program for Accounts Receivable for Waren Sports Supply. For each procedure described in the left hand column identify the evidence type. Then identify the assertion for which you believe the evidence is the most relevant.;Accounts Receivable;Procedure (Evidence) Evidence Type Assertion;1. Discuss with the client personnel whether any interest-earning notes receivable from customers, or any receivables from employees are included in the trade accounts receivable account.;2. Foot the accounts receivable lead schedule and agree the balance to the general ledger.;3. Test foot the accounts receivable subsidiary ledger and agree the total to the general ledger.;4. Select a sample of customer accounts from the accounts receivable subsidiary ledger and confirm them directly with customers.;5. For customers not responding to confirmations, trace the 12/31/13 balances to cash received after year-end in the cash receipts journal.;6. Trace and agree a sample of credit sales transactions from the accounts receivable subsidiary ledger to sales journal, and to related shipping documents and invoices.;7. Select a sample of credit sales transactions for the last three days of 2013 and the first three days of 2014 from the sales journal and trace to related shipping documents and invoices noting recording in correct period.;8. Select a sample of shipping documents representing credit sales during the year and trace them into the sales journal and accounts receivable subsidiary ledger.;9. Discuss with the client their method for computing the allowance for doubtful accounts and assess its reasonableness. Discuss the collectability of any large accounts 90 day past due.;10. Recalculate the allowance for doubtful accounts.;11. Discuss with client whether any of the receivables listed in the accounts receivable subsidiary ledger have been factored or sold.;12. Review the footnote discussing the method of determining the allowance for doubtful accounts to make sure it is clear and consistent.;Part 2: Assume your group is the audit team for the audit of Waren Sports Supply (a client with a traditional information system, which you should be familiar with). Since this is an initial audit, you will need to develop audit programs to make sure important assertions are tested for each account. Using Word, write simple substantive audit programs for each of the following accounts: (1) Fixed Assets, (2) Accounts Payable, (3) Sales Revenue, and (4) Advertising Expense. In each case, list in the left-hand column at least five important management assertions to be tested, and then in the right-hand column describe a specific audit procedures to test each management assertion.;Note: Duplicates are allowed across assertions.;Remember, the assertions and evidence you choose may be related to (1) transactions, (2) account balances/details, or (3) presentation/disclosure.;Part 3: Use the information below to perform analytical procedures on all of Waren?s income statement accounts. While there is some flexibility in how you can develop expectations for each account, you must use each of the three primary methods discussed in class (trends, ratios, and reasonableness) at least once in your analysis. Make sure to highlight any discrepancies you feel are material and warrant further investigation. Select from your analyses one account you feel deviates materially from expectations and investigate the discrepancy appropriately. For your investigation, I play the role of Ray Kramer, so you should direct your questions to me?in my office?as part of your investigation. Once you have an explanation, describe some substantive evidence you could gather to test it.;Use Excel to complete your analyses. In all cases, make sure you clearly show how you develop your expectations. Also, make sure you clearly and adequately document your investigation.;Additional information that might be useful includes the following;1. Waren sold 19,350 items this year (net of returns). They sold 19,610 items last year (net of returns).;2. Jim Adams worked 2100 hours of regular time this year and 194 hours of overtime. Nancy Ford worked 383 hours of regular time this year and 6 hours of overtime.;3. The average effective tax rate in the industry is 21%.;4. The average market interest rate on CDs during the year was 5%.;?;Waren Sports Supply;Income Statement;Year ended December 31, 2012;Revenue;Sales 1,610,450;Less;Sales Returns & Allowances 61,225;Sales Discounts Taken 16,002;Net Sales 1,533,223;Cost of Goods Sold 1,141,100;Gross Margin 392,123;Operating Expenses;Rent expense 55,800;Advertising expense 26,229;Office Supplies expense 5,644;Depreciation expense 33,821;Wages and salaries 138,400;Payroll taxes 11,300;Bad debt expense 3,833;Other operating expense 28,174;Total Operating Expenses 303,201;Operating Income 88,922;Other Income and Expenses 0;Income Before Taxes 88,922;Income Tax Expense 18,762;Net Income 70,160


Paper#23907 | Written in 18-Jul-2015

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