The following misstatements are included in the accounting records of the Joyce Manufacturing Company:
1. A sales invoice was miscalculated by $1,000 as a result of a key-entry mistake.
2. Cash paid on accounts receivable that had been prelisted by a secretary was stolen
by the bookkeeper who records cash receipts and accounts receivable. He failed to
record the transactions.
3. A material sale was recorded on the last day of the year even though the goods were
not shipped until 3 days later.
4. Merchandise was shipped to a customer, but no bill of lading was prepared. Because
billings are prepared from bills of lading, the customer was not billed.
5. The controller approved a payment to a consulting firm owned by his sister. The
consulting firm did not actually perform any services for the company.
6. The shipping clerk included several additional valuable items to a shipment that were
not included in the customer’s order and were not invoiced to the customer. The
shipping clerk has an arrangement with the customer to share the proceeds from
sales of the additional items shipped.
7. Cash paid on accounts receivable was stolen by the mail clerk when the mail was
opened.
a. Identify whether each misstatement is an error or fraud.
b. For each misstatement, list one or more controls that should have prevented it from
occurring on a continuing basis.
c. For each misstatement, identify evidence the auditor can use to uncover it