11-25 (Potential misstatements and tests of controls) Your firm has been engaged to audit the financial statements

of the Haven Company. In obtaining an understanding of internal control pertaining to cash disbursement transactions, the following questionnaire is used: 1. 2. 3. 4. 5. 6. 7. 8. 9. Are there periodic independent bank reconciliations of bank accounts? Is a daily summary of checks prepared and agreed to checks issued? Are supporting documents stamped paid or otherwise canceled after payment? Are unused checks stored in a secure area with access limited to authorized personnel? Are checks prenumbered and accounted for? Is there supervisory approval of account classification when entering transactions? Is a check protection device used to imprint check amounts? Is there segregation of duties between journalizing and posting? Is there an independent check of daily check summary amounts with check register entries?

Required a. Identify a potential misstatement that could occur, assuming a No answer to each question. b. For each question, would you expect the control procedure to be a computer control or a manual control? c. Identify a possible test of controls for the control procedure, assuming a Yes answer to each question. 12-24 (Financial statement assertions) In designing the audit program for substantive tests of accounts receivable and plant assets in the Abbott Company, the auditor identified the following audit objectives: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. Accounts receivable include all claims on customers at the balance sheet date. Recorded plant assets represent assets that are in use at the balance sheet date. Accounts receivable are properly identified and classified Plant assets are stated at cost less accumulated depreciation. The allowance for uncollectible accounts is a reasonable estimate of future bad debts. The entity has ownership rights to all plant assets at the balance sheet date. Accounts receivable represent legal claims on customers for payment. Plant asset balances include the effects of all transactions and events that occurred during the period. Accounts receivable represent claims on customers at the balance sheet date. Depreciation methods used by the client are adequately disclosed in the notes to the financial statements. The accounts receivable balance represents gross claims on customers and agrees with the sum of the accounts receivable subsidiary ledger Capital lease agreements are disclosed in accordance with GAAP. Appropriate disclosures are made about accounts receivable that are assigned or pledged at the balance sheet date. Plant assets are properly identified and classified in the balance sheet.

Required Identify the financial statement assertion to which each objective relates.