Question

1. For each of the scenarios listed above, describe the most likely judgment trap that ultimately biased the auditor’s decision making in the audit.

2. 6-30 (Objective 6-5) The following general ledger accounts are included in the trial balance for an audit client, Jones Wholesale Stationery Store.

   Accounts payable	Depreciation expense—	Prepaid insurance
   Accounts receivable	furniture and equipment	Property tax expense
   Accrued interest expense	Furniture and equipment	Property tax payable
   Accrued sales salaries	Income tax expense	Purchases
   Accumulated depreciation—	Income tax payable	Rent expense
   furniture and equipment	Insurance expense	Retained earnings
   Advertising expense	Interest expense	Salaries, office and general
   Allowance for doubtful accounts	Inventory	Sales
   Bad debt expense	Loans payable	Sales salaries expense
   Cash	Notes payable	Telecommunications
   Common stock	Notes receivable—trade	expense

   Required

   1. Identify the accounts in the trial balance that are likely to be included in each transaction cycle. Some accounts will be included in more than one cycle. Use the format that follows.

      Cycle	Balance Sheet Accounts	Income Statement Accounts
      Sales and collection
      Acquisition and payment
      Payroll and personnel
      Inventory and warehousing
      Capital acquisition and repayment

   2. How will the general ledger accounts in the trial balance most likely differ if the company were a retail store rather than a wholesale company? How will they differ for a hospital or a government unit?

Answer 1

Jones Wholesale Stationery Store Requirement a Cycle Balance Sheet Accounts Income Statement Accounts Accounts receivable ,Notes receivable- trade,Allowance for doubtful Bad debt expense, Sales Sales and collection accounts,Cash Advertising expense,Depreciation Accounts payable ,Cash ,Furniture and expenses-Furniture and equipment, Prepaid insurance Property tax payable, Income tax payable, Accumulated depreciation- Furniture and equipment, Inventory equipment, Insurance expense ,Income tax expense,Purchases, Rent expense Telecommunication expense ,Property Acquisition and Payment tax expense Sales salaries expense ,Salaries, Office and general Payroll and personnel Inventory and Warehousing Cash, Accrued Sales salaries Inventory Accrued interest expense ,Cash,Common stock ,Loans Payable Purchases Interest expense Capital acquisition and repayment Retained earnings,Notes payable Requirement b The general ledger accounts in the trial balance are not likely to differ much between a wholesale and retail company unless there are departments having many categories. There would be huge difference for a government unit or hospital. A government unit use fund accounting system and have totally different titles. Hospital has different types of revenue accounts instead of sales.