Biltrite case Module I through X Essay

3618 Words Apr 6th, 2014 15 Pages
Biltrite Practice Case

Module III: Control Testing – Sales Processing
1. The sampling plan in the design of controls does not provide tests about revenues and accounts receivables. The weakness that I could see is the fact that goods that were delivered to customers were not billed which result in bill of lading not being pre-numbered. Because of this, bills of lading do not count as an effective sampling unit. For a successful audit, auditors need to evaluate orders randomly and check to see if the goods were shipped and the customers received invoices prior to the receipt of the product, Therefore in this case, existence/occurrence is the course of action for the auditors.
2 and 3 are attached under “2009 attribu”
4. The
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b. The audit adjustment is $340,000 which make the allowance balance to be $560,000 which I think is adequate as adjustment.
c. See attached excel document- “2009” ar. 5. The full document “2009 ar” is attached with the case.
Module VI: Sales and Purchases Cutoff Tests
1. Inventory cut off errors:
a. Vouchers 12458 and 12459 was received in 2009 as inventory but not recorded in the books until next year, 2010. Which resulted in overstatement of $854,154 as effect on net income
b. Raw material inventory that was in transit. This action does not affect net income because it was exluded
c. Sales 33003, 33004, 33006, 33007, and 33009 were performed in 2010 but they were reported in 2009 which resulted in overstatement of $3,760,330 in net income.
I think that the misstatement listed above appear to be intentional in order to overstate net income and make it look higher that its value. This practice is one of the earning inflation devices that can be used to overstate net income.
2.See excel document “2009 cutoff” for audit adjustments.
Module VII: Search for unrecorded Liabilities
1.Comment on the adequacy for the procedures performed:
Lucas was able to check if there was additional invoices that were received and recorded. He also checked

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