View the step-by-step solution to:

The following items were discovered during the audit of the Cash account. For each item identified: Indicate the audit procedure that most likely...

The following items were discovered during the audit of the Cash account. For each item identified:
a. Indicate the audit procedure that most likely would have led to the discovery of the error.
b. Identify one or two internal controls that would have prevented or detected the misstatement or irregularity.
Audit Findings
1. The company had overstated cash by transferring funds at year-end to another account but failed to record the withdrawal until after year-end.
2. On occasion, customers with smaller balances simply send in cash payments.
The client has an automated cash receipts process, but the employee opening the cash pocketed the cash and destroyed other supporting documentation.
3. Same as finding 2, but the employee prepared a turnaround document that showed either an additional discount for the customer or a credit to the customer's account.
4. The controller was temporarily taking cash for personal purposes but intended to repay the company (although the repayment never occurred). Understating outstanding checks covered up the cash shortage.
5. The company had temporary investments in six-month certificates of deposit at the bank. The CDs were supposed to yield an annual interest rate of 12 percent, but apparently are yielding only 6 percent.
6. Cash remittances are not deposited in a timely fashion and are sometimes lost.
7. Substantial bank service charges have not been recorded by the client prior to
8. A loan has been negotiated with the bank to provide funds for a subsidiary company. The loan was made by the controller of the division, who apparently was not authorized to negotiate the loan.
9. A check written to a vendor had been recorded twice in the cash disbursements journal to cover a cash shortage.

Recently Asked Questions

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.


Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question