View the step-by-step solution to:

Assignment File Assignment 2 Due date: 17 January 2013 Weighting: 25% of the total marks for this course Question 1 (35 marks) Case Hudson Ltd Your...

refer to relevent HKSAs. I need the best 100% accurate answer which gives 100% results.
Assignment File 1 Assignment 2 Due date: 17 January 2013 Weighting: 25% of the total marks for this course Question 1 (35 marks) Case — Hudson Ltd Your audit client, Hudson Ltd, has recently installed a new computerized system to process the shipping, billing and accounts receivable records more efficiently. During the interim field work, the audit assistant completed the review of the accounting system and the internal controls. The assistant determined the following information concerning the new IT system and the processing and control of shipping notices and customer invoices. Each major computerized function — shipping, billing, accounts receivable, and so on — is permanently assigned to one specific computer operator, who is responsible for making program changes, running the program, and reconciling the computer log. Responsibility for the custody and control of the backup disks and system documentation is randomly rotated among the computer operators monthly to prevent any one person from having access to the back-up disks and documentation at all times. Each computer programmer and operator has access to the computer room via a magnetic card and a digital code that is different for each card. The systems analyst and the supervisor of the computer operators do not have access to the computer room. The system’s documentation consists of the following items: program listing, error listing, logs, and record layout. To increase efficiency, batch totals and processing controls are omitted from the system. Hudson ships products to customers directly from two warehouses, which forward shipping notices to general accounting. There, the billing clerk enters the price of the item and accounts for the numerical sequence of shipping notices. The billing clerk also prepares daily adding machine tapes of the units shipped and the sales amounts. Shipping notices and adding machine tapes are forwarded to the IT department for processing. The computer output consists of: a three-copy invoice that is forwarded to the billing clerk; and a daily sales register showing the aggregate totals of units shipped and sales amounts that the computer operator compares to the adding machine tapes.
Background image of page 1
2 ACT B417 Auditing II The billing clerk mails two copies of each invoice to the customer and retains the third copy in an open invoice files that serves as a detailed accounts receivable record. Required: a Identify eight weaknesses in the internal controls in the new computerized system, or weaknesses or inefficiencies in the procedures for processing and controlling shipping notices and customer invoices. Suggest a recommendation for each weakness that you identified. (16 marks) b How can the concept of test data be used in this audit? Explain the difficulties you would have to overcome if you wished to use test data. (6 marks) c Describe in general the steps involved if the auditors wish to use generalized audit software in this audit. Then, design at least five specific audit tests that can be conducted using this approach with respect to the amount of total sales for the year and accounts receivable balance as at the year-end date. (13 marks) Question 2 (25 marks) Desmond Yau, a CPA, is auditing the financial statements of Costco Wholesalers Ltd, a continuing audit client, for the year ended 31 January 2012. On 5 January 2012, Desmond observed the tagging and counting of Costco’s physical inventory and made appropriate test counts. These test counts have been recorded on a computer file. As in prior years, Costco gave Desmond two computer files. One file contains the perpetual (FIFO) records for the year ended 31 January 2012. The other file represents the physical inventory count on the 5 January. You should note the following: Desmond issued an unqualified opinion on the prior year’s financial statements. All inventory is purchased for re-sale and located in a single warehouse. Desmond has obtained the appropriate computerized audit software. The perpetual inventory file contains the following information in item number sequence: Beginning balances at 1 February 2011: - item number - item description - total quantity - price.
Background image of page 2
Show entire document

This question was asked on Jan 07, 2013.

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 and customizable flashcards—available anywhere, anytime.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access or to earn money with our Marketplace.

    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
  • -

    Flashcards

    Browse existing sets or create your own using our digital flashcard system. A simple yet effective studying tool to help you earn the grade that you want!

    Browse Flashcards