Murray Company processes a significant number of routine intercompany transactions on a monthly basis. Individual intercompany...
Murray Company processes a significant number of routine intercompany transactions on a monthly basis. Individual intercompany transactions are not material and primarily relate to balance sheet activity; for example, cash transfers between business units to finance normal operations. A formal management policy requires monthly reconciliation of intercompany accounts and confirmation balances between business units. However, there is no process in place to ensure performance of these procedures. As a result, detailed reconciliations of intercompany to investigate selected large-dollar intercompany account differences. In addition, management prepares a detailed monthly variance analysis of operating expenses to assess their reasonableness. Required: Indicate whether it is a significant deficiency or material weakness. Justify your decision.
Homework Answers
Answer:
The auditors will probably say that the significant deficiency in timely reconciliations of the company’s financial data is problematic, to say the least. While immaterial amounts will represent the vast majority of information that the company fails to record, it’s safe to say that the auditor should contact those who oversee these procedures. Sure, it’s monthly recordings of information, but that does not seem very accurate when transactions and operations occur every day. Otherwise, nobody is going to be recording them as they happen, and the financial statements are definitely incomplete regardless of materiality. So, we can say it’s a significant deficiency
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Murray Company processes a significant number of routine
intercompany transactions on a monthly basis. Individual
intercompany...
The items below were found while reviewing internal control during your evaluation. Consider whether the item...
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For each of the following independent cases, state the highest level of deficiency that you believe...
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Which of the following matters would an auditor most likely consider to be a significant deficiency to be communicated to the audit committee
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auditing
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Review the Audit report (found in the 10-K) for the following
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Audit Firm, Financial statement
period covered).
Note:
1. Each Company may have two audit reports (one opinion on
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audit of internal controls) or the two opinions may be combined
into one report.
2. You are not required to review the entire 10-K. Find the
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auditing
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Review the Audit report (found in the 10-K) for the following
two companies. Highlight or summarize
differences between the reports (other than the name of Company,
Audit Firm, Financial statement
period covered).
Note:
1. Each Company may have two audit reports (one opinion on
financial statements and one for
audit of internal controls) or the two opinions may be combined
into one report.
2. You are not required to review the entire 10-K. Find the
audit report in the 10-K...
LO 10-6, 10 10-36 Based on an assessment of audit risk, the auditors are concerned with the following two risks: 1. The risk that that the client might be making duplicate payments to vendors. 2. The risk that the client's accounting clerk might be making unauthorized payments to himself. a. Assuming that the client has a manual accounting system, describe how the auditors can design a test to identify the duplicate payments and unauthorized payments. b. Assuming that the client...
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