会计专业英语课后答案 Answer for lesson6

6.1 Select the best answer for each of the following unrelated items
1.C
2. A
3. D
4. D
5. C
6.A
7. A
8. C
9. C
10. D
11.B
12. A
13. C
14. D
15. C
16.A
17. B
18. A
19. B
20. A
6.2 Case study: you are the internal auditor of a construction company Y. Y employs a large number of workers on various construction sites. The following information is available concerning the wages systems: Hours worked are recorded using a clocking in/out system. On arriving for work and at the end of each days work, each worker enters their unique employee number on a keypad. Workers on each site are controlled by a foreman. He has a record of all employee numbers and can issue temporary numbers for new employees. Any overtime is calculated by the computerized wages system and added to the standard pay. The two staffs in the wages department amend the computerized wages system in respect of employee holidays, illness, as well as setting up and maintaining all employee records. The computerized wages system calculates deductions from gross pay, such as employee taxes and net pay. Finally a list of net cash payments for each employee is produced. Cash is delivered to the wages office by secure courier the two staff place cash into wages packets for each employee along with a handwritten note of gross pay, deductions an net pay. The packets are given to the foreman for distribution to the individual employee.
Required: w hat’s wrong in Y’s internal control? Please give your recommendations.
Solution:
Weakness 1: No check to ensure that each employee inputs his/ her employee number.One employee could input two numbers hiding the fact that one employee is absent. Recommendation1: The computerized wages system should print a list of employees per the computer system during the day and the foreman should sign the list to confirm it is accurate. Weakness 2: Employees can be paid for work not done. No check to ensure that hours recorded in the computer system actually relate to hours worked.
Recommendation2: A record of hours worked by each employee should be printed from the computerized wages system and signed by the site foreman to confirm that the hours are accurate. Weakness 3 : Fake or dummy employees can be put onto the payroll. The foreman can set up employee records for worker who do not exist. As payment is made automatically from the record of hours worked
Recommendation3: The wages office should check the list of employees against personnel records of authorized employees. Any new employees particularly should be verified in this way before payment is made
Weakness 4:The staff in the wages office could collude by setting up fake employees records in a similar way to the site foreman.
Recommendation4: The list of employees on the payroll should be checked by a person outside of the wages department, for example the personnel department or the chief accountant. The list of net payments should be signed by this person to show it is correct.
Weakness 5: Gross pay inflated by wages department staff. The staff in the wages office could add extra hours to the records of some employees and remove the net pay from the payment received from the courier prior to making up the pay packets.
Recommendation5: The computerized payroll system should be programmed to produce a list of all amendment made to the payroll. This list should be reviewed by a responsible official outside the wages department prior to wages being paid. The computerized payroll system should produce payslips for each employees showing the hours worked ,gross and net pay etc. Employees should then check that the cash paid agree to the net payment recorded on the payslip.
6.3 Case study: you have been asked by the board of trustees of a local church to review its accounting procedures. As part of this review, you have prepared the following comments relating to the collections made at weekly services and recordkeeping for members’ pledges and contributions:
a. The church’s board of trustees had delegated responsibility for financial management and
internal audit of the financial records to the finance committee. This group prepares the
annual forecast and approves major disbursements, but is not involved in collections or
recordkeeping. No internal or independent audit has been considered necessary in recent years because the same trusted employee has kept church records and served as financial secretary for 15 years.
b. The offering at the weekly service is taken by a team of ushers. The head usher counts the
offering, and the offering, along with a notation of the amount counted, is placed in the church safe. The next morning, the financial secretary opens the safe and recounts the offering. The financial secretary withholds about $100 to meet cash expenditures during the coming week and deposits the remainder of the offering intact. In order to facilitate the deposit, members who contribute by cheque are asked to draw their cheques to cash.
c. At their request, a few members are furnished with prenumbered, predated envelopes in which
to insert their weekly contributions. The head usher removes the cash from the envelopes to be counted, combines it with the loose cash included in the offering and discards the
envelopes. No record is maintained of issuance or return of the envelopes, and the envelope system is not encouraged.
d. Each member is asked to prepare a contribution pledge card annually. The pledge is regarded as
a moral commitment by the member to contribute a stated weekly amount. Upon request,
based upon the amounts shown on the pledge cards, the financial secretary prepares a tax receipt for members to support the amount of their annual contributions.
Required
Describe the weaknesses and recommend improvements in procedures for each of:
1. Offerings given at weekly services.
2. Recordkeeping for members’ pledges and contributions.
Organize your answer as follows:
Weakness Recommended improvement
1.
Weakness Recommended improvement
1) Financial secretary exercises too much
control over collections. To the extent possible, the financial secretary’s responsibilities should be confined to recordkeeping.
2) Finance committee is not exercising its
assigned responsibility for collections. Finance committee should assume a more active supervisory role.
3) The internal auditing function has been
assigned to the finance committee, which
also has responsibility for the
administration of the cash function.
Moreover, the finance committee has not
performed the internal auditing function. An internal auditor reporting to the audit committee should be appointed to perform periodic internal auditing procedures, or outside auditors should be engaged.
4) The head usher has sole access to cash
during the period of the count. One
person should not be left alone with the
cash until the amount has been recorded
or control established in some other way. The number of cash counters should be increased to at least two, and cash should remain under joint surveillance until counted and recorded so that any discrepancy will be brought to attention.
5) The collection is vulnerable to theft or
misappropriation while it is being
counted and from the church safe prior to
its deposit in the bank. The collection should be deposited in the bank’s night depository immediately after the count. Physical safeguards, such as locking and bolting the door during the period of the count, should be instituted. Vulnerability to robbery will also be reduced by increasing the number of cash counters.
6) The head usher’s count lacks usef ulness
from a control standpoint because he or
she surrenders custody of both the cash
and the record of the count. The financial secretary should receive a copy of the collection report for posting to the financial records. The head usher should maintain a copy of the report for use by the audit committee.
7) Contributions are not deposited intact
daily. There is no assurance that amounts
withheld by the financial secretary for
expenditure will be properly accounted
for. Contributions should be deposited intact daily. If it is considered necessary for the financial secretary to make cash expenditures, he or she should be provided with a cash working fund. The fund should be replenished by cheque based upon a properly approved reimbursement request and satisfactory support.
8) No mention is made of bonding. Key employees and members involved in
receiving and disbursing cash should be bonded.
9) Written instructions for handling cash
collections apparently have not been
prepared. Particularly because much of the work involved in cash collections is performed by unpaid, untrained church members, often on a short-term basis, detailed written instructions should be prepared.
10) Cheques are made out to cash. Cheques should be made payable to the church.
2.
Weakness Recommended improvement
1) The envelope system has not been
encouraged. Control features which it
could provide have been ignored. The envelope system should be encouraged. Donors should indicate on the outside of each envelope the amount contributed. Envelope contributions should be reported separately and supported by the empty collection envelopes. Prenumbered envelopes will permit ready identification of the donor by authorized persons
without general loss of confidentiality.
2) The church maintains no permanent record
of amounts pledged and contributed. These
records are needed to 1) provide valid
support for tax deductibility of members’
contributions, 2) permit better planning for
fund drives, and 3) provide a basis for
direct confirmation of amounts contributed. A members’ contribution record should be prepared by the financial secretary from the pledge cards and collection envelopes.
3) No investigation is made of differences
between the amounts pledged and
contributed. All members should be furnished with periodic written advice of the amounts pledged and contributed. If properly handled by the audit committee, this procedure can be combined with direct confirmation of the amount contributed. Not only will control be better, but members more likely will fulfill their pledges.
4) Receipts for the amounts contributed are
being furnished to members based upon the
amounts shown on pledge cards. This is
improper because actual contributions may
not equal pledges. The maintenance of members’ co ntribution records and the furnishing of periodic advice to members will correct this weakness.
5) No provision is made for the receipt of
contributions by mail. This method of
giving should be encouraged. Mail should be opened by a church employee other than the financial secretary. This employee should list the receipts, maintain a copy of this listing, and deposit the receipts.
Cheques should be stamped with the restrictive endorsement when received.
6.4 Case study: Paula & Peter, professional accountants, have audited the financial statements of Columbia Furniture Limited (CFL) for several years. In connection with the audit of CFL’s financial statements for the year ended December 31, 20X8, Tom, a senior auditor was assigned to assist in the audit engagement planning and in the audit of inventory. Tom has become very knowledgeable about this industry and about CFL in particular over the past few years.
CFL took the physical inventory on December 31, 20X8. Tom attended and test counted inventory. He kept a record of all test counts. After the physical inventory taking was over, he obtained
•a list of used and unused physical inventory tag numbers,
•the last several receiving reports used for receiving material from suppliers, and
•the last several shipping reports for goods shipped to customers.
CFL stored excess inventory (that is, furniture and other material not immediately required for operating activities) in a public warehouse. CFL maintains a record of these inventory items. Tom reviewed CFL’s recor ds relating to inventory stored in the public warehouse.
In early Jan 20X9 CFL prepared a list of inventory quantity and cost summary based on physical inventory taken at December 31, 20X8. The list provided relevant data for each item, such as item number, description, quantity, unit cost, cost extension, and total amount for all inventory items. Tom tested the cost accounting system, the cost of inventory items, and the arithmetic accuracy of the inventory list.
Required
1. Sale cut-off
Identify some audit procedures that Tom could undertake to obtain evidence of CFL’s sales cutoff at December 31 as part of annual audit of the company’s financial statements.
2. Capital assets
Explain what substantive tests Tom could perform in order to obtain sufficient audit evidence about the capital assets of CFL and give the reason for the tests.
3. Inventory
Assume that the inventory amount as per the inventory list prepared by CFL is correct.
Describe two additional auditing procedures (that is, procedures not completed by Tom) that should be performed during the inventory count. For each auditing procedure you provide, identify the reason of the test.
Solution:
1.
(1) Determine what CFL’s cutoff policy is, review the policy for reasonableness, and compare it to the prior year for consistency.
(2)Select a sample of sales invoices (including the last serial invoice number) from those recorded in the last few days of Dec and the first few days of Jan.
(3)Trace these sales invoices to shipping documents and determine that sales have been recorded in the proper period in accordance with company cutoff policy.
(4)Determine that the cost of goods sold has been recorded in the period of sale.
(5)Select a sample of shipping documents for the same period and trace these to the sales invoice. Determine that the sale and the cost of goods sold have been recorded in the proper period.
(6)Review the cutoff for sales returns and allowances, determine that it has been based upon a consistent policy and that there have not been abnormal sales returns and allowances in Jan; this might indicate either an overstatement of sales during the audit period or the need for a valuation account at Dec 31 to provide for future returns and allowances.
2
·Analytical procedures used in connection with capital assets from an affiliated firm include: •comparing capital asset balances to prior years
•comparing the amortization expense/capital assets ratio to prior years
•comparing the balance of repairs and maintenance expense to prior years
•comparing total additions to capital budgets
•obtain a continuity schedule for capital assets and vouch additions and disposals to supporting documentation
•review the details of repairs and maintenance for large or unusual items to see if they should be reclassified as capital assets
•tour the plant and other facilities to physically inspect the existence of capital assets •Review the title documents for significant assets purchased during the year.
•Enquire of management about liens on capital assets, and review the terms of mortgages, bond indentures, and equipment trust certificates.
•Review insurance policies to ensure that recorded assets are properly insured (if a client does not own an asset, it would not be insured although there are some exceptions for leased assets). •Review invoices and contracts to ensure that the recorded value of assets corresponds to the costs and prices shown on the documents.
•Determine if disposed assets are properly removed from the records.
Existence:
Obtain confirmation from the public warehouse manager to verify the existence of inventory, or observe inventory at the warehouse if inventory in the warehouse is significant.
ii) Measurement:
Credit and debit variances should be appropriately allocated to cost of sales and inventory (for example, through the use of supplementary rates) in order that inventory is measured
substantially at actual cost.
iii) Valuation:
•Determine that the inventory is valued using the lower of cost or market rule.
•Review slow-moving and obsolete items (particularly items not in use that are stored in a public warehouse) to determine if adequate provision is made to report inventory at lower of cost or market.
iv) Completeness:
Determine that the public warehouse inventory owned by CFL is included in the inventory list.
v) All assertions (overall reasonableness) — analytical reviews:
Compare inventory quantity, cost, and total amounts by product line with prior year’s balances and extend audit procedures appropriately.。