Question

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TBSACO0078 Response to Risk of Material Misstatement Marquette Company is a nonissuer of securities to the public. Suppose that Mike Akers, the in-charge auditor for the Marquette Company audit engagement, has prepared a list of possible errors and fraud that might cause a material misstatement of Marquette's financial statements. Akers has also prepared a list of internal control policies and procedures that, if properly designed and implemented, would likely prevent or detect such errors and fraud. For each of the possible errors and fraud issues specified in the table below, identify the most relevant audit procedure that would enable the auditor to resolve the suspected issue. Click in each associated cell and select an item from the pop-up list. Items in the list may be used once, more than once, or not at all. LII ! 1. The auditor suspects that vouchers were prepared and processed by an accounting department employee for merchandise that was neither ordered nor received by the entity. 2. The details of invoices for equipment repairs were not clearly identified or explained to the accounting department employees. The auditor suspects that the bookkeeper incorrectly recorded the repairs as fixed assets. 3. The auditor suspects that the entity is inappropriately increasing the cash reported on its balance sheet by drawing a check on one account and not recording it as an outstanding check on that account, and simultaneously recording it as a deposit in a second account 4. The auditor suspects that the entity's controller has overstated sales and accounts receivable by recording fictitious sales to regular customers in the entity's accounting records. fi III Give feedback

options:

• Obtain the bank reconciliation and trace deposits in transit to the cutoff bank statement.
• Scan the debits to the fixed asset accounts and agree selected amounts to vendors' invoices and management's authorization.
• Compare the details of the cash disbursement journal entries with totals posted to the general ledger.
• Prepare a schedule of interbank transfers.
• Physically inspect a sample of fixed assets and trace them to the fixed asset subsidiary ledger.
• Confirm cash balances with the bank.
• Examine the entity's shipping documents to verify that the merchandise that produced the receivable was actually sent to the customer.
• Examine the supporting purchase orders and receiving reports for selected paid vouchers.

Answer 1

1.Examine the supporting purchase orders and receiving reports for selected paid vouchers.

2.Scan the debits to the fixed asset accounts and agree selected amounts to vendors' invoices and management's authorization.

3.Prepare a schedule of interbank transfer.

4.Examine the entity's shipping documents to verify that the merchandise that produced the receivable was actually sent to the customer.