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Mesa Electronics, located in Phoenix, is attempting to determine if it should set up a lockbox collection system for its Northeastern customers. Currently the firm receives an average of 350 payments per working day (assume 250 working days per year) from that section of the country. These payments provide an average daily collection of $175,000 per working day. Mesa estimates that it can reduce the collection time (both mailing and processing time) by three days and invest any funds released by the lockbox system at a 12 percent pretax annual rate. The New York bank processing the checks would charge Mesa 20¢ per check processed plus a fixed charge of $20,000 per year. Should Mesa set up the lockbox collection system utilizing the services of the bank?
For each of the above independent situations: (1) describe the overall impact on audit risk and provide your reasons for your answer, and (2) identify the specific component(s) of audit risk affected.
Identify four types of control mechanisms (ways controls are applied) used in Wal-Mart organization. Compare and contrast these control mechanisms. Determine the effectiveness of these control mechanisms.
How large would the salvage value of the automated equipment have to be to make the investment in the automated equipment financially attractive?
Write journal entries for each transaction and Evaluate profit and loss for given case
State the level of materiality as immaterial, highly material or material. If you cannot select the level of materiality, state the extra information needed to make a decision.
Many businesses receive most of their cash on credit sales through the mail. Suppose you own a business in which you must hire employees to handle cash receipts and perform the related accounting duties.
Internal control has gained increasing importance among management, external auditors, regulators, and others. Use a specific example that illustrates the answer.
Support your response from the e-text and/or course articles, do not use only web sites and avoid the unacceptable web sites. What fundamental concepts are embodied in the definition of internal control?
A bank branch must keep a stock of cash on hand for customer withdrawals. The net daily withdrawal rate at the branch is $5,000. The opportunity cost of cash is 10% per year.
What are the qualitative benchmarks an auditor can use to assess materiality? How can an auditor use both qualitative and quantitative measures to make a better assessment of materiality?
Why is the Code of Conduct important to the profession? Many professionals believe that in today's business environment it is more difficult to adhere to the Code of Professional Conduct. Why might this be true?
List the internal controls that should be in effect solely because a EDP system is employed, classifing them as (1) Those controls pertaining to input of information and (2) All other types of computer controls.
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