Multicultural Workforce: Bridging Differences

Tutorial 2

Question 1

When an entity does not adequately segregate duties, the possibility of cash being stolen before it is recorded is increased. If the auditor suspects that this type of defalcation is possible, what type of audit procedures can he or she use to test this possibility?

There are several types of audit procedures can he or she use to test this possibility is he or she can use assertion of completeness. The table below will explain how it tests this possibility.

Assertion | Possible misstatements | Control Procedures | Test of controls |

Completeness | Cash being stolen before recording | Segregation of duties Monthly bank reconciliation prepared and independently reviewed. Cheques strictly endorsed and daily cash list prepared. Daily cash receipts reconciled with posting to debtor’s subsidiary ledger.Customer statements prepared on a regular basis, complaints handled independently. | Observe and evaluate proper segregation of duties.Review monthly bank reconciliation to indications of independent review. Observe mail receipts procedures.Test reconciliation of daily cash receipts with posting to debtor’s subsidiary ledger. Inquiry of personnel about handling of monthly statements and examination of resolution of complaints. |

Question 2

Describe how the auditor verifies the accuracy of the aged trial balance?

The auditor verifies the accuracy of the aged trial balance using the following steps:

* First, a copy of the aged trial balance of accounts receivable is obtained from the client and the total balance is compared to the accounts receivable general ledger balance.

* Second, a sample of customer accounts selected for proper inclusion in the aged trial balance. For each selected customer account, the auditor traces the customer's balance back to the subsidiary ledger detail and verifies the total amount and the amounts included in each column for proper aging....