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Audit Assignment #7a




Write a 4 page essay that answers the questions, found attached below.;Now address the following;Keystone Computers & Networks, Inc. (KCN), (click attachment labeled #2 for a review) has 933 accounts receivable, with a total book value of $10,235,457. From that population, Adams, Barnes & Co. (ABC), CPAs, selected a sample of 260 accounts (142 unique accounts) for confirmation for the year ended December 31, 20X5, as illustrated by the working paper, available below labeled #3. First and second confirmation requests resulted in replies for all but 10 of those accounts. ABC performed alternative procedures on those 10 accounts and noted no exceptions. Of the replies, 5 had exceptions as described below (with ABC follow-up);The balance of $120,000 is incorrect because we paid that amount in full on December 31. 20X5.;Follow-up: An analysis of the cash receipts journal revealed that the check had been received in the mail on January 9, 20X6.;Of the balance of $30,000, $330 is incorrect because on December 19 we returned a printer to Keystone when we found that we didn't need it. We ordered it in the middle of November when we had anticipated a need for it. When we received the printer, we realized it was unnecessary and returned it unopened.;Follow-up: An analysis of the transaction revealed that it was received by Keystone on December 31, 20X5, and that the adjustment to the account had been processed on January 2, 20X6.;The balance of $214,000 is correct, and we paid it on January 5, 19X6.;Follow-up: An analysis of the cash receipts journal revealed that the check had been received on January 10, 20X6.;Of the balance of $130,000, $10,000 is incorrect because it represents goods that we didn't receive until January 5, 20X6.;Follow-up: Inspection of shipping records reveals that the item was shipped on January 3, 20X6.;Of the account's $18,000 balance, we paid $17,460 and the $540 (3 percent of the total) remains unpaid because the Keystone salesperson told us that she would be able to obtain a 'special' discount beyond the normal.;Follow-up: While inspection of the sales agreement indicated no such discount arrangement, discussions with Loren Steele (controller) and Sam Best (president) indicated that the salesperson had inappropriately granted such a discount to the client. On January 15, 20X6, they processed the discount and credited the account for $540.;Directions;Answer the following questions for the above case.;For each of the five exceptions, determine the account's proper "audited value.;Use the probability-proportional-to-size method with your analysis from part (A) to evaluate your sample's results. The risk of incorrect acceptance is 5 percent.;Prepare working papers that identify the five exceptions, in a table, determine the account?s audited value, and determine if the variances are acceptable.;Be sure your essay is well written and in APA Format.


Paper#77903 | Written in 18-Jul-2015

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