Accounts Receivable and Internal Control

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Assignment

Please note you have three assignments for this week. The case study, the weekly assignment and continue working on the final draft for the individual research project. Case Study (Knapp book):
Dollar General Stores
Questions 1-4
Weekly Assignment:
Textbook (Boynton book): Complete and submit the following questions for grading: 14-26
14-28
15-23
15-27
16-24
16-33
14-26 (Analytical procedures) the following data was taken from the production and accounting records for Casuccio Manufacturing, Inc.  
Unaudited 20X9
Audited 20X8
Audited 20X7
Operating Data
 
 
 
Capacity in Units
450,000
450,000
450,000
Production in Units
450,000
400,000
300,000
Inventory in Units
32,000
28,000
21,000
Financial Data ($000)
 
 
 
Total Revenues
35,200
27,500
21,200
Total Assets
23,000
19,500
15,700
Accounts Receivable, Net
5,900
4,300
3,900
Bad Debt Expense
175
135
105
Accounts Receivable Written Off
165
125
100

Required
1. Calculate the following ratios for 20x9, 20x8 and 20x7:
a. Sales to total assets b. Sales to production
c. Revenue per unit sold
d. Accounts receivable growth to sales growth
e. Uncollectable accounts expense to net credit sales
f. Uncollectable accounts expense to accounts receivable written off g. Accounts receivable turn days 2. a. Describe the implications of the resulting ratios for the auditor's audit strategy for year 20x9. b. What specific audit objectives are likely to be misstated? c. How should the auditor respond in terms of potential audit tests?

14-28 (Controls over cash receipts processing at a church) You have been asked by the board of trustees of a local church to review its accounting procedures. As a part of this review, you have prepared the following comments relating to the collections made at weekly services and recordkeeping for members’ contributions:

1. The church’s board of trustees has delegated responsibility for financial management and audit of the financial records to the finance committee. This group prepares the annual budget and approves major disbursements but is not involved in collections or recordkeeping. No audit has been considered necessary in recent years because the same trusted employee has kept church records and served as financial secretary for 15 years.

2.The collection at the weekly service is taken by a team of ushers. The head usher counts the collection in the church following each service. He then places the collection and a notation of the amount counted in the church safe. Next morning the financial secretary opens the safe and counts the collection again. She withholds about $100 to meet cash expenditures during the coming week and deposits the remainder of the collection intact. To facilitate the deposit, members who contribute by check are asked to draw their checks to “cash.”

Required:
Describe the weaknesses and recommend improvements in procedures for collections made at weekly services. Organize your answer using the following format:

Weakness/ Recommended Improvement(s)

Weakness:
This is a revenue recognition issue that affects gross receipts and all round trip transactions not to mention fund manipulation. Every area of the Auditing Cycle is compromised and carries tremendous inherent risk. The control processes of documents and records along with function and controls activities are jeopardized. All transaction objectives, balance objectives and disclosure objectives need to be re-evaluated. There is not one system that is affected under this scenario. Revenue 

15-23 The following information was taken from the accounting records for Aurora Manufacturing, Ins.:

 
Year 5 Unaudited
Year 4 Audited
Year 3 Audited
Year 2 Audited
Year 1 Audited
Inventory
525,000
460,000
390,000
310,000
225,000
Current Assets
1,350,000
1,175,000
950,000
750,000
600,000
Accounts Payable
115,000
113,000
97,500
850,000
70,000
Current Liabilities
545,000...
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