Assurance and Auditing-Under the former system of controls, the following misstatements were noted. Identify each of the following for EACH scenario - Assignment Example

Running Header: ASSURANCE AND AUDITING Assurance and auditing Introduction IT based program is better in accounting than manual one. However, it may lead to massive errors if necessary control application programs are not integrated. Scenario a A. The assertion that most relates to this scenario is the occurrence of purchase and cutoff assertions (Puncel, 2008). This is because a purchase that was done was recorded twice which means that a transaction that did not happen was recorded. The file was also recorded in a different week from which the transaction happened. B. The misstatement would lead to overstatement of expenses and accounts payable.

Goods that have already been paid for will be charged again. C. To correct and avoid such this misstatement, an automated control program that will match the data file number and those saved in the master file, should be adopted. This program will prevent repeating file number that has been recorded earlier thus preventing the existence of such an error. A program that prompts the user for the date of the transaction should be integrated to make it more efficient. This will allow the person entering the data determine whether the documentation is outdated or up to date.

Scenario b A. The relevant assertion that most relates to this situation is completeness of revenues (Puncel, 2008) because the product delivered is undercharged by quoting a lower price. The revenues earned from the transaction are thereby low than they should be. B. This will lead to understatement of sales and accounts receivable since a transaction was charged a small fee in the invoice than its true one on the catalogue. C. An automated application program that links the prices of products sold to the marked price should be implemented.

It should match the product number in the invoice, and that found on the inventory. This application will inform the person preparing the account if he under of over quotes a product and provide a provision for discount allowed. It will only take a different figure from that on the inventory if the there is a cut which adds up to the marked price if added to the selling price. Scenario c A. This case fits well in the completeness of billing assertion since transactions were billed, but the billing was not recorded. B. The result of this is understatement of sales and accounts receivable since the billing of some goods delivered is not be recorded.

It will also lead to overstatement of cash account since payment of the goods whose invoices were lost will not be accounted for. C. A possible remedy to this is to have a software program that will automatically match the shipping documents and the invoice documents. In case of omissions, the program will display a warning massage indicating the difference between the delivered products and the remunerations received. This will allow the accounting clerk to know which deliveries have not been billed and which have been billed.

Scenario d A. This situation pertains to the completeness of expenditure assertion (Puncel, 2008). A fee that was supposed to be paid for inform of the commission was not recorded making the expenditures incomplete. B. The effect of this will be understatement of accounts payable and expenditure, due to failure to charge all costs of transacting. C. A possible solution to this will be the installation of an automated application that will link a transaction to all concerned departments. The application will display all the departments that are affected by a transaction automatically.

It should also prohibit the closing of such a transaction before all the details of all the affected departments are entered. Where an error of omission is committed, a dialog box will pop up with an error massage which will prevent the occurrence of such an error. References Puncel, L. (2008). Audit Procedures. Chicago: CCH, 2007.