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You are a staff accountant and have been assigned to perform the audit of Immanuel Klein Ltd. The interim audit is taking place and you have just completed your understanding of the internal controls...

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You are a staff accountant and have been assigned to perform the audit of Immanuel Klein Ltd. The interim audit is taking place and you have just completed your understanding of the internal controls over the acquisition and payment cycle. You noted the controls are reasonably good and this year the plan is to rely on the internal controls and to reduce the amount of substantive testing for this cycle. In order to assess the control risk you select 40 transactions for testing. In your tests you discover the following exceptions:
1) Two items in the acquisition journal have been misclassified.
2) Five receiving reports were recorded in the acquisition journal at least two weeks later than their date on the receiving report.
3) One invoice had been paid twice
4) One cheque amount in the cash disbursements journal was for $100 less than the amount stated on the vendor’s invoice.
5) One voided cheque was missing
Required
Identify an internal control that should have prevented each misstatement.
Use the table on the next two pages to answer the question. (6 marks)
     Exception
    Preventative Control ( 1 mark each)
    1. Two items in the acquisition journal have been misclassified.
    
    2. Five receiving reports were recorded in the acquisition journal at least two weeks later than their date on the receiving report.
    
    3. One invoice had been paid twice.
    
     Exception
    Preventative Control ( 1 mark each)
    4. One cheque amount in the cash disbursements journal was for $100 less than the amount stated on the vendor’s invoice.
    
    5. One voided cheque was missing.
Answered Same DayMar 03, 2020

Solution

Pulkit answered on Mar 04 2020
99 Votes
You are a staff accountant and have been assigned to perform the audit of Immanuel Klein Ltd. The interim audit is taking place and you have just completed your understanding of the internal controls over the acquisition and payment cycle. You noted the controls are reasonably good and this year the plan is to rely on the internal controls and to reduce the amount of substantive testing for this cycle. In order to assess the control risk you select 40 transactions for testing. In your tests you discover the following exceptions:
1) Two items in the acquisition journal have been...
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