ACC 521-011 Example of
Auditing Final Exam
1. This exam consists of 6 questions, on 11 pages. Please answer questions #1. to #5. in the separate EXAM ANSWER BOOK, and answer Question #6 - Multiple Choice with explanations - in this book. 2. The time available is 3.0 hours.
3. The exam is worth 50% of your overall course grade.
4. Write your name & student number on the front of the test. 5. This is a closed book test. The only aid that may be used one of the calculator models listed in the Course Outline as approved by the Accounting Department. 6. Any cell phones and electronic devices should be stored at the front of the room in your bag. Please silence all devices that make sounds. If any electronic devices are found with you, you can be charged with ACADEMIC MISCONDUCT. 7. You may use short forms, abbreviations, and point form if appropriate in your response, but to receive marks your meanings must be clear and unambiguous, and each point must be a complete thought, to receive any marks. 8. Show your calculations and state any assumptions you make.
Print Name __________________________________
Student Number _______________________________
For Instructor Use:
QUESTION 1 (13 marks, 31 minutes)
Thermatic Technologies Inc. is an Ontario based company that manufactures sensors and thermostatic devices for use in the food processing industry. The company purchases various components from suppliers in the USA and Asia, and assembles the finished products in its Ontario plant. The company incurs other administrative and operating expenditures. Its purchasing/payables/payments (P/P/P) process involves the following procedures. Liabilities for goods and services purchased are entered in an accounts payable journal, and the associated debits are classified to the asset and expense accounts they apply to. The company has well defined control procedures for approving supplier invoices for payment, for signing cheques, for keeping accounting records, and for reconciling the chequing accounts.
The company is being audited for the first time this year, and you are the senior auditor assigned to the engagement. Based on the work you have done so far to understand and evaluate the company’s internal control, you have concluded the control procedures appear to be operating well. As a result, you have decided to test the controls because if they are effective it can reduce the other substantive procedures required in your overall audit plan. You now need to design a program (list) of control tests to audit the effectiveness of the controls over cash disbursements.
Based on past experience, you know it is best to select one sample of recorded cash payment transactions, and use it to specify control tests to provide evidence related to these five control objectives: Validity; Authorization, Accuracy, Classification, and Proper Period (Note: The P/P/P system is automated and your firm’s IT auditor’s have determined it operates effectively to meet the Accounting control objective well, so you don’t need to test that aspect.)
a. Provide two consideration regarding your selection of the sample of cash payments transactions to ensure sampling risk is minimized. [2 marks]
For parts b. and c please use the table provided in the Answer Book to organize your responses
b. State the meaning of each control objective as it applies to the cash payments transaction class. The meaning of Validity is provided as an example of how to complete this part of the table. [4 marks]
c. Describe the specific control test you would perform on the sample of cash payments to...
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