There are 3 problems to complete. Please number them according
1.The following are various audit procedures performed to satisfy specific transaction-related audit objectives as discussed in Chapter 6. The general transaction-related audit objectives from Chapter 6 are also included.
Audit Procedures
1. Trace from receiving reports to vendors’ invoices and entries in the acquisitions journal.
2. Add the sales journal for the month of July and trace amounts to the general ledger.
3. Examine expense voucher packages and related vendors’ invoices for approval of expense account classification.
4. Observe opening of cash receipts to determine that cash receipts are promptly deposited and recorded.
5. Ask the accounts payable clerk about procedures for verifying prices, quantities, and extensions on vendors’ invoices.
6. Vouch entries in sales journal to sales invoices and related shipping documents.
7. Examine the footnotes about the company’s policies for recording revenue transactions to determine whether the disclosures are understandable. General Transaction-Related Audit Objectives
Occurrence Posting and Summarization Presentation
Completeness Classification
Accuracy Timing
Required
A) Identify the type of audit evidence used for each audit procedure.
B) Identify the general transaction-related audit objective or objectives satisfied by each audit procedure.
2.Target and Kohl’s are chains of stores that cater to customers who desire name-brand goods at lower prices. The Securities and Exchange Commission (SEC) Form 10-K filing rules require management of U.S. public companies to include background information about the business, as well as the most recent financial condition and results of operations. Access each company’s most recent Form 10-K. These can be obtained through the SEC website (www.sec.gov), or directly from the investor relations section of the Target (www.target.com) and Kohl’s (www.kohls.com) websites.
Required
1. Read the description of each company’s business in Part I, Item 1 of Form 10-K. Evaluate the similarity of each company as a basis for making financial comparisons.
2. Each company follows what is called a 52/53-week year in which the fiscal year ends on the Saturday nearest January 31. Given the nature of these companies, why does a year end near January 31 make sense? Note that most public companies have a December 31 year end.
3. Use the financial statements included in Part II, Item 8 to calculate the gross margin percentage and inventory turnover ratio for each company for the most recent year. Which company has the higher gross margin percentage? Which company has the higher inventory turnover?
4. Evaluate whether the relation between the gross margin percentage and inventory turnover makes sense given the description of each company’s business.
3.You are evaluating audit results for assets in the audit of Roberts Manufacturing. You set the preliminary judgment about materiality at $50,000. The account balances, performance materiality, and estimated overstatements in the accounts are shown next.
Account Account Balance Perform Materiality Estimate of total overstatement
Cash 50,000 5,000 1,000
Accounts receivable 1,200,000 30,000 20,000
Inventory 2,500,000 50,000 ?
Other assets 250,000 15,000 12,000
Total $ 4,000,000 $100,000 ?
Required
A. Assume you tested inventory amounts totaling $1,000,000 and found $10,000 in overstatements. Ignoring sampling risk, what is your estimate of the total misstatement in inventory?
B. Based on the audit of the assets accounts and ignoring other accounts, are the overall financial statements acceptable? Explain.
C. What do you believe the auditor should do in the circumstances?