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Describe the type of fraud risk that is likely associated with the need for this audit procedure.

TASK

The following audit procedures are included in the audit pro- gram because of heightened risks of material misstatements due to fraud.

1. Use audit software to search purchase transactions to identify any with nonstandard vendor numbers or with vendor names reflecting related parties.

2. Search sales databases for missing bill of lading numbers.

3. Use audit software to search for journal entries posted to the sales revenue account from a nonstandard source (other than the daily sales journal).

4. Use audit software to search cash disbursement master files for missing check numbers.

5. Search the accounts receivable master file for account balances with missing or un- usual customer numbers (e.g., “99999”).

6. Use audit software to create a list of all credits to the repair and maintenance expense account for follow-up testing.

7. Engage an actuarial specialist to examine management’s assumptions about average length of employment and average life expectancy of retirees used in pension ac- counting decisions.
8. Send confirmations to customers for large sales transactions made in the fourth
quarter of the year to obtain customer responses about terms related to the transfer
of title and ability to return merchandise.
For each audit procedure:

a. Describe the type of fraud risk that is likely associated with the need for this audit
procedure.

b. Identify the related accounts likely affected by the potential fraud misstatement.

c. Identify the related audit objective(s) that this procedure addresses.
Required
Required

This problem requires the use of ACL software, which can be accessed through the textbook website. Information about downloading and using ACL and the commands used in this problem can also be found on the textbook website.

You should read all of the reference material preceding the instructions about “Quick Sort” before locating the appropriate command to answer parts a. through e. For this problem, use the file labeled “Pcard Transactions” in the ACL_Cypress_Pcards Project. (Pcards, or purchasing cards, are issued to certain employees to allow them to make purchases on behalf of the company.) The suggested command or other source of information needed to solve the problem requirement is included at the end of each question.

a. Compute the total of the Amount column for comparison to the total Pcard pur- chases amount as recorded by the client. (Total)
Data
Analytics
Required

b. Pcard purchases over $1,000 are required to be reviewed by a supervisor. Print any purchases for subsequent follow-up where the total exceeded that amount. (Filter)

c. Identify the three vendors from which the largest total Pcard purchases were made.
You will need to save the summary by vendor as a file, by clicking on “Output” within the Summarize command, in order to sort the data. (Summarize and Quick Sort)

d. For the vendor with the largest total amount identified in part c., identify and print out any transactions that exceeded $1,000 for subsequent follow-up. (Filter and Quick Sort)

e. You are concerned that some employees may be structuring transactions to keep them below the $1,000 threshold for approval. Identify transactions that are between $990.00 and $999.99. (Filter

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