Leah Pasternak

Auditing I ACC403
Homework Submission
Chapter 7 Problems
7-29:
a) Direct confirmation with the vendor and examination of the invoice from the vendor.
b) Physical examination of the inventory and direct confirmation of the inventory with the custodian.
c) Examination of the cash receipt journal and the deposits of bank for cash receipts as well as directly
confirming with the customer.
d) Examine the vendors invoice and examine the title for ownership of the assets.
e) Examine the copy of the client of vendors statements and direct confirmation with the banker.
f) Physical examination and examination of the sales invoice of sale of goods reflecting the sale price.
g) Count the petty cash and confirm with the custodian.
7-33:
Audit Procedure
1.
2.
3.
4.
5.

Audit Evidence
Physical Examination
Analytical Procedures
Recalculation
Inquiry of the Client
Confirmation

6.
7.

Physical Examination
Documentation

Audit Objective
Accuracy and Existence
Accuracy
Detail Tie-in
Realizable Values
Completeness, Accuracy and
Existence
Accuracy and Completeness
Rights

Chapter 8 Problems
8-29:
a) A related party transaction occurs when one party within the transaction is able to impose the
contract terms which would not have happened to the parties if they would have been unrelated. When
the related party transactions are of a material nature, the following documents are needed: 1. Nature
of relationships and 2. description of the transaction for the reported period.
b) I believe that all of the preceding transactions would be considered related party transactions.
c) Some of the financial statement implications that could occur would be the lease of the property from
Mr. Smedes who happens to be a member of Canyon Outdoors board of directors, and also the lines of
credit who are managed by the lending officer Suzanne Strayhorn who is also the wife of the largest
investor of Canyon Outdoor.
d) Some procedures the auditor may perform in order to identify potential related party transaction
would be; inquire of management the identity of the entitys related parties, including changes from the
prior period, inquire as to the nature of the relationships between the entity and the potential related

parties, inquire as to whether the entity entered into any transactions with these related parties during
the period, and if so, the type and purpose of the transactions.
8-32:
a)
Account
Executive Salaries

10/31/12 Balance
546,940

Factory Hourly Payroll

10,038,877

Factory Supervisors
Salaries
Office Salaries

785,825
1,990,296

Sales Commissions

2,018,149

Notes
3% increase;
546,940 X 103%
3% increase;
10,038, 877 X 103%
3% increase;
785,825 X 103%
3% increase;
1,990,296 X 103%
Increase in sales =
6,157,948
6,157,947 X 75% =
4,618,461
4,618,461 X 5% =
230,923
2,018,149 + 230,923

Final Balance
$563,348
$10,811,067
$809,400
$2,050,005
$2,249,072

b)
Details
Sales
Executives Salary
Factory Hourly Pay
Factory Sup. Salary
Office Salaries
Sales Commissions

2013 Expected
57,474,182
615,970
11,476,319
810,588
2,055,302
2,367,962

2013 Actual
57,474,182
563,348
10,811,067
809,400
2,050,005
2,249,072

Difference
0
(52,622)
(665,252)
(1,188)
(5,297)
(118,890)

Difference in %
0%
-8.54%
-5.8%
-0.15%
-0.26%
-5.02%