Problem: To assess properly the internal controls in place at Harrison Enterprises, you have found there are three major objectives that an entity should follow in designing an effective internal control system:
- reliability of financial reporting
- efficiency and effectiveness of operations
- compliance with laws and regulations
In 3-4 paragraphs:
Discuss what each of the following major objectives mean:
?reliability of financial reporting
- efficiency and effectiveness of operations
- compliance with laws and regulations
Discuss how they might be satisfied at Harrison Enterprises.
Prepare an unadjusted misstatement audit schedule with a comment on your judgment of the audit findings based on the following audit results for Harrison. Harrison has the following misstatements:
- understated allowance for uncollectible accounts: $95,000 estimated based on analytical procedures
- accounts receivable/sales cutoff misstatements: $60,000 estimated population misstatements based on the sample, including sampling error
- difference between physical inventory and book figures: $120,000 actual population misstatements
- unrecorded liabilities: $285,000 estimated population misstatements based on the sample, including sampling error
- repairs expense items that should have been capitalized: $90,000 estimated based on analytical procedures
- Material misstatements are any amount more than 5% of current assets, total assets, and income before taxes.