Several misstatements were identified as a result of the fraud perpetrated by CUC management. (a) For each misstatement identified, indicate one management assertion that was violated. (b) For each misstatement identified, indicate one audit procedure the auditor could have used to detect the misstatement.
What will be an ideal response?
[a] Irregular charges against merger reserves – occurrence or accuracy of revenues, completeness or
accuracy of expenses, and valuation or existence of merger reserves.
False coding of services sold to customers – classification of revenues and valuation of deferred revenues.
Delayed recognition of membership cancellations and bank rejection of charges made to members’
credit card accounts – occurrence of revenues and existence or valuation of cash.
[b] Irregular charges against merger reserves – scan the journals looking for unusual journal entries or
examine the journal entries for the adjustments to the merger reserve account and examine related
support for those entries/adjustments.
False coding of services sold to customers – examine documents supporting cash receipts to ascertain
proper classification of revenue from various programs.
Delayed recognition of membership cancellations and bank rejection of charges made to members’
credit card accounts – test year-end bank reconciliations.
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Indicate whether the statement is true or false
On January 1, Year 4, Jones Realty Company issued 8 percent term bonds with a face amount of $1 million due January 1, Year 14 . Interest is payable semi-annually on January 1 and July 1 . On the date of issue, investors were willing to accept an effective interest rate of 6 percent. Assume the bonds were issued on January 1, Year 4 . for $1,148,959 . Using the effective interest amortization
method, Jones Realty Company recorded interest expense for the six months ended June 30, Year 4, in the amount of a. $40,000 b. $80,000 c. $68,938 d. $34,469 e. none of the above
When should you write the introduction to a business report?
A) As your first step in writing the report B) After you have completed the report C) About halfway through D) The introduction can be effectively written at any point.
Wolanski Corporation has provided the following data for its most recent year of operations: Selling price per unit$48Manufacturing costs: Variable manufacturing cost per unit produced: Direct materials$11Direct labor$5Variable manufacturing overhead$5Fixed manufacturing overhead per year$110,000Selling and administrative expenses: Variable selling and administrative expense per unit sold$4Fixed selling and administrative expense per year$71,000 Units in beginning inventory 0Units produced during the year 11,000Units sold during the year 8,000Units in ending inventory 3,000 The unit product cost under variable costing is closest to:
A. $21.00 B. $35.00 C. $25.00 D. $31.00