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If a company’s control risk is assessed as low, the auditor needs to gather evidence on the operating effectiveness of the controls.
a. For each of the following control activities, indicate the audit procedure the auditor would use to determine its operating effectiveness.b. Briefly describe how substantive tests of account balances should be modified if the auditor finds that the control procedure is not working as planned. In doing so, indicate (a) what could happen because of the control deficiency, and (b) how the auditor’s tests should be expanded to test for the potential misstatement.1. Credit approval by the credit department is required before salespersons accept orders of more than $15,000 and for all customers who have a past-due balance higher than $22,000.2. All merchandise receipts are recorded on pre numbered receiving slips. The controller’s department periodically accounts for the numerical sequence of the receiving slips.3. Payments for goods received are made only by the accounts payable department on receipt of a vendor invoice, which is then matched for prices and quantities with approved purchase orders and receiving slips.4. The accounts receivable bookkeeper is not allowed to issue credit memos or to approve the write-off of accounts.5. Cash receipts are opened by a mail clerk, who prepares remittances to send to accounts receivable for recording. The clerk prepares a daily deposit slip, which is sent to the controller. Deposits are made daily by the controller.6. Employees are added to the payroll master file by the payroll department only after receiving a written authorization from the personnel department.7. The only individuals who have access to the payroll master file are the payroll department head and the payroll clerk responsible for maintaining the payroll file. Access to the file is controlled by computer passwords.8. Edit tests built into the computerized payroll program prohibit the processing of weekly payroll hours in excess of 53 and the payment to an employee for more than three different job classifications during a one-week period.9. Credit memos are issued to customers only on the receipt of merchandise or the approval of the sales department for adjustments.10. A salesperson cannot approve a sales return or price adjustment that exceeds 6% of the cumulative sales for the year for any one customer. The divisional sales manager must approve any subsequent approvals of adjustments for such a customer.
Allegheny Publishing's stock is expected to give a year end dividend, D1, of $4. The dividend is expected to increase at a constant rate of 8% per year, and the stock's required rate of return is 12%.
If the company does not maintain a TIE ratio of at least 5 to 1, then its bank will refuse to renew the loan and bankruptcy will result. What is Manor's TIE ratio?
You purchased a stock for 47.10, over course of a yr you got $2.40 per share in dividends and inflation avged 3.4 percent. Today you sold your shares for 49.50 a share. What is your aproxx real rate of return on this investment?
Computing the standard deviation for treasury bills and Calculate the standard deviation of Treasury bill returns and inflation over this period
Ninja Co. issued 13-year bonds a year ago at a coupon rate of 7.9 percent. The bonds make semiannual payments. If the YTM on these bonds is 6.2 percent, what is the current bond price?
Swamp & Sand's current dividend is $1.6 per share. Analysts expect the firm's growth rate of 2% per year to continue indefinitely. The current stock price is 12.5 . Calculate the required return on equity for this firm.
Company plans to finance $100,000 with internally generated funds but desires to secure the loan for remainder.
Compute the annual approximate interest cost of not taking a discount using the following scenarios. What conclusion can be drawn from the calculations?
(i) What is the value of this firm and the share price? (ii) What will be the value of the firm after the repurchase and what will be the share price?
Explain What action should the company president take and should the order be accepted if the Executive Division plans on selling the desks in the outside market for $420
What interest rate would be indifferent to a lottery payout today of $3,330,143.22, or equal annual end of the year payouts of $300,000? Please show detailed calculation for your answer.
to determine break-even point bep managers must examine the fixed and variable costs expenses in relation to returns.
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