The lakeside company auditing cases

Her primary responsibility is evidence gathering in connection with the examination of financial statements for the year ending December 31, One of the audit areas that concern Mitchell is the accounts receivable balance generated by the distributorship side of the company.

The lakeside company auditing cases

Her primary responsibility is evidence gathering in connection with the examination of financial statements for the year ending December 31, One of the audit areas that concern Mitchell is the accounts receivable balance generated by the distributorship side of the company.

The lakeside company auditing cases

The average age of the outstanding accounts had jumped from Consequently, she viewed the inherent risk in this area to be quite high. In the latter part of October, Mitchell discussed her findings to date with Dan Cline and Wallace Andrews, audit partner and audit manager for the engagement.

At that meeting, Mitchell outlined the critical areas as she perceived them within the Lakeside examination. She also reminded Cline and Andrews of the initial brainstorming meeting and several potential issues identified [See Case 1].

Because of her concern, Mitchell spent considerable time reviewing with Cline and Andrews the revenue and cash receipts cycle. All three were aware that receivables provide special opportunities for fraud, including theft and the reporting of fictitious sales.

Because of the high level of inherent risk for receivables, Cline suggested that further testing be done in hopes of reducing the control risk initially assessed in this area. Otherwise, a considerable amount of substantive testing would be required of the audit team.

Consequently, Mitchell was assigned to perform extensive testing to determine if adequate control procedures and policies exist and are operating effectively. Once this test of controls is finished, a decision can be reached as to the amount of substantive testing that is necessary, and whether or not substantive procedures, such as confirming accounts receivable, can be done on an interim basis.

Cline also asked Mitchell to consider possible internal control improvements that could be recommended to Lakeside. Benjamin Rogers, the president of the company, had ndicated that he wanted the systems to improve as the organization grew. Finally, at this same meeting, the audit team decided that the existence of some of the accounts receivable balances would be confirmed directly with the Lakeside customers.

Andrews suggested that interim balances as of November 30, instead of final balances as of December 31,be confirmed unless severe internal control problems were encountered.

These systems record both the increases and decreases made to accounts receivable. In her opinion, a number of the procedures appear to be well designed for a company the size of Lakeside, but several problems do exist. For example, no separate credit and collection departments are maintained.

She began testing the specific control policies and procedures by seeking information that would enable her to answer control questionnaires such as the one presented in Exhibit The CPA firm had designed each questionnaire with potential control problems in mind. Mitchell anticipated being able to complete each of these documents after a series of conferences with Lakeside employees.

On November 3,Mitchell visited the Lakeside headquarters to discuss internal control matters with several responsible officials. Her first conversation was with George Miller, assistant to the president. Refer to Exhibits and Who has access to the accounts receivable subsidiary ledger? I do, since I maintain the ledger, but in our company, all records are really open.

I imagine that anyone who needed information could come in and look at them. How often do you age the accounts receivable? Only at the end of the year.

However, I can easily review a specific account and determine its age at any time that I want. Is the subsidiary ledger ever tested by anyone else within the Lakeside organization? The independent auditors examine it at least once a year. No other testing would seem necessary.

If a customer complains that an invoice is incorrect, who is responsible for investigating the matter? They have been directed to send any such complaints to me. I pull the sales invoices from my file and see what the trouble is.

I personally get in touch with the customers to settle the problem. How do you verify credit approval?Question The Lakeside Company: Auditing Cases 5. TESTS OF CONTROLS: THE REVENUE AND CASH RECEIPTS CYCLE Carole Mitchell, a supervising senior auditor with the CPA firm of Abernethy and Chapman, has been assigned to the Lakeside Company engagement.

Her primary responsibility is evidence gathering in connection with the examination of financial statements for the year ending . Case #3 The Lakeside Company: Auditing Cases Analysis of a Potential Audit Client · Benjamin Rogers is president of the Lakeside Company, a retailer/ distributer of consumer electronics.

· Rogers is unsatisfied with King and Company's CPAs, and has been in contact with Abernethy and Chapman. The cases in The Lakeside Company are intended to create a realistic view of how an auditor organizes and performs an audit examination. These cases provide a simulation that permits students to put the abstract and difficult concepts of auditing into practice.

10e Harry J. Rosenblatt solutions manual for Auditing and Accounting Cases Brown solutions manual for Lakeside Company Case Studies in Auditing 12e.

The cases in The Lakeside Company create a realistic view of auditing by putting the abstract concepts into practice. Features For undergraduate/graduate courses in auditing.

Transcript of Lakeside Case 7. Mando Moss & Alex Rippe Substantive testing of the Estimated Bonus Expense Completing the Worksheet Abernathy and Chapman are performing an audit on Lakeside Company and Carole Mitchell, supervising senior is preparing for .

Trussel & Frazer, Lakeside Company: Case Studies in Auditing, 12th Edition | Pearson