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FORENSIC ACCOUNTING cat.docx - 30 June Sh Sh 2014 2013...

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FORENSICACCOUNTINGASSIGNMENT 1 &2QUESTION ONEWhat is an internal control system and what is the importanceDebts totaling Sh. 178,000 were abandoned during the year as bad; the takings included Sh12,500 recovered in respect of an old debt abandoned in the previous year.ShShPayments for goods4,747,500Takings5,465,000Payments for expenses565,000Profits152,500________5,465,0005,465,00030 June20142013ShShCash in hand43,50022,500Balance at bank109,50078,000Sales debtors245,500229,000Creditors for purchases of stock121,500139,500Stock at cost950,000975,000(Total 20 Marks)QUESTION TWOa.Who is charged with the responsibility for the prevention and detection offrauds and errors?(10 marks)b.What action should the auditor undertake if he detects errors and frauds whilecarrying out a review of the client’s financial statements?(10 marks)(Total 20 Marks)QUESTION THREEGACIGORU, a proprietor of a grocery and general store has not previously engagedan accountant.He informs you that this year his bankers have insisted on a properset of accounts.GACIGORU supplies you with his trading results for the year ended30 June 2014 which are as follows:GACIGORU instructs you to examine his records and prepare accounts.From your examinationof the records and interview with your client, you ascertain the following information:1.The takings are kept in a drawer under the counter; at the end of each day the cash iscounted and recorded on a scrap of paper; at irregular intervals Mrs. GACIGORUtranscribes the figures into a notebook; a batch of slips of paper was inadvertently destroyedbefore the figures had been written into the notebook, but Mr. And Mrs. GACIGORUcarefully estimated their takings for that period, and the estimated figure is included in thetotal of Sh. 5,465,000.2.Mr. GACIGORU involved himself in betting for 30 weeks of the year, spending Sh. 500 perweek with cash taken from the drawer.His winnings totaled Sh. 29,500.3.The following balances are ascertained as correct:4.Debts totaling Sh. 178,000 were abandoned during the year as bad; the takings included Sh12,500 recovered in respect of an old debt abandoned in the previous year.ShShPayments for goods4,747,500Takings5,465,000Payments for expenses565,000Profits152,500________5,465,0005,465,00030 June20142013ShShCash in hand43,50022,500Balance at bank109,50078,000Sales debtors245,500229,000Creditors for purchases of stock121,500139,500Stock at cost950,000975,000
5.Mr. GACIGORU rents the shop for living accommodation at Sh. 1,500 per week for 52weeks in a year; the rent is included in expenses of Sh 565,000.The living accommodationcomprises one-third of the building.6.The total expenses also include:Sh. 17,500 running expenses of GACIGORU’s private car;Sh. 30,000 for exterior decoration of the whole premises;Sh. 80,000 for alterations to the premises to enlarge the storageaccommodation.7.Mr. GACIGORU takes Sh. 5,000 per week from the business for his wife’s personalexpenses.This excludes the amount indicated in note 8.8.Mr. GACIGORU draws Sh. 750 per week for cigarettes and beer.9.During the year, Mr. GACIGORU bought a secondhand car (not for use in the business)from a friend; the price agreed was Sh. 175,000, but as the friend owed Mr. GACIGORU Sh.33,500 for goods supplied from the business, the difference was settled by cheque.10.An insurance policy for Mr. GACIGORU’s life matured and realized Sh. 320,500.11.Mr. GACIGORU cashed a cheque for Sh. 50,000 for a friend; the cheque was dishonoredand the friend is repaying the Sh. 50,000 by installments.He had paid Sh. 20,000 by 30June 2014.

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Term
Spring
Professor
NoProfessor
Tags
Balance Sheet, Generally Accepted Accounting Principles, Mr GACIGORU Sh, Sh Kimeu

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