Problem

(Objective 7-4) As auditor of the Star Manufacturing Company, you have obtaineda. A trial...

(Objective 7-4) As auditor of the Star Manufacturing Company, you have obtained

a. A trial balance taken from the books of Star one month before year-end:

 

Dr. (Cr.)

 

Dr. (Cr.)

 

Cash in bank

$ 87,000

Mortgages payable

(400,000 )

 

Trade accounts receivable

345,000

Capital stock

(300,000 )

 

Notes receivable

125,000

Retained earnings

(510,000 )

 

Inventories

317,000

Sales

(3,130,000 )

 

Land

66,000

Cost of sales

2,300,000

 

Buildings, net

350,000

General and administrative expenses

622,000

 

Furniture, fixtures, and equipment, net

325,000

 

Legal and professional fees

3,000

 

Trade accounts payable

(235,000)

Interest expense

35,000

 

b. There are no inventories consigned either in or out.


c. All notes receivable are due from outsiders and held by Star.

Which accounts should be confirmed with outside sources? Briefly describe from whom they should be confirmed and the information that should be confirmed. Organize your answer in the following format:*

 

From Whom

Information to Be

Account Name

Confirmed

Confirmed

Objective 7-4

Identify and apply the eight types of evidence used in auditing.

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