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Harrison Enterprises Effective internal control, unadjusted misstatement audit schedule

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: â—¾reliability 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.

Solution Preview

- reliability of financial reporting

The reliability of financial reporting means that you feel confident that all the transactions are from legitimate and authorized events. That no transaction were left out and no transactions are included twice or in the wrong period. Reliability financial reporting means that all transactions are recorded in the right amount, in the right period, in the right account and summarized correctly. And, finally, the summarized amounts are reported in the formal financial statements and related footnotes in ...

Solution Summary

Your discussion is 302 words and explains these three objectives of internal controls with examples. In excel, you now have a proposed audit adjustment schedule and the accumulated impact on profits, assets and liabilities to test for materiality.

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