Short Audit Case:
The Valley Publishing Company 10th Edition
Author
William J Morris Jr.
ISBN# 978-0-912503-26-4
The Short Audit Case is a simulated audit of the Valley Publishing Company, a small town newspaper. The case includes the typical audit procedures used for account balance testing, including a variety of analytical procedures, and the preparation of financial statements with footnotes from the audit work papers. Each of the 10 weekly assignments includes challenging situations for the students. For the most part, the work has been preplanned. A computer disk is included, with the trial balance and work papers for each assignment.
CONTENTS:
Introduction
Section 1: Problem Narration
Preliminary Assignment
Assignment #1 Purchases and Cash Disbursements (except payroll)
Assignment #2 Cash in Banks and on Hand
Assignment #3 Accounts Receivable, Bad Debts, and Advertising Revenues
Assignment #4 Inventory of Newsprint, Newsprint Consumption and Publication Sales
Assignment #5 Prepaid Expenses, Investments and Other Assets
Assignment #6 Property, Plant and Equipment, Accumulated Depreciation, Gain or Loss on Disposal, and Related Expenses
Assignment #7 Vouchers Payable, Accrued Liabilities and Deferred Revenue
Assignment #8 Long–Term Debt and Related Interest Expense, and Stockholder’ Equity
Assignment #9 Operations
Assignment #10 Income Tax and Completing the Audit
Section 2: Selected Records and Documents
Part 1 – Miscellaneous Records and Documents – Exhibits 1–13
Part 2 – Voucher Register
Part 3 – Selected Vouchers (Computer Files)
Section 3: Permanent File
PF/1 – History and Background
PF/2 – Organization Chart
PF/3 – Chart of Accounts
Excerpts from Minutes of Meetings of Shareholders and Board of Directors:
PF/4 Year 20x1
PF/5 Year 20X2
PF/6 – The Accounting System and Control Procedures:
Purchases and Cash Disbursements
Revenue and Cash Receipts
Revenue and Cash Receipts – Flowcharts
Section 4: 20x1 Work Papers
Report and Financial Statements
Cash Flow Worksheets
Senior’s Audit Memorandum
Working Trial Balance
Adjusting Journal Entries
Reclassification Entries
Client’s Representation Letter
Correspondence with General Counsel re Pending Litigation
Preliminary Analytical Procedures
Audit Captions:
A Cash in Banks and on Hand
B Accounts Receivable, Bad Debts and Advertising Revenues
C Inventory of Newsprint, Newsprint Consumption and Publication Sales
D–E Prepaid Expenses, Investments and Other Assets
F Property, Plant and Equipment, Accumulated Depreciation, Gain or Loss on Disposal, and Related Expenses
G–H Vouchers Payable, Accrued Liabilities and Deferred Revenue
I–K Long Term Debt and Related Expenses, and Stockholders’ Equity
M Operations
N Federal Income Taxes
T Test of Purchases
Section 5: 20x2 Work Papers
Audit Program
Audit Captions:
A Cash in Banks and on Hand
B Accounts Receivable, Bad Debts and Advertising Revenues
C Inventory of Newsprint, Newsprint Consumption and Publication Sales
D–E Prepaid Expenses, Investments and Other Assets
F Property, Plant and Equipment, Accumulated Depreciation, Gain or Loss on Disposal, and Related Expenses
G–H Vouchers Payable, Accrued Liabilities and Deferred Revenue
I–K Long Term Debt and Related Expenses, and Stockholders’ Equity
M Operations
N Federal Income Taxes
T Test of Purchases
Clients Representation Letter
Correspondence with General Counsel re Pending Litigation
Appendix
Instructions for Us of Computer Files
Objective of the Case
Designed to illustrate the principles of audit field work
by preparing working papers and performing audit procedures,
including basic auditing principles, the preparation, organization and
integration of audit working papers and preparing the financial statements
and audit report from the working papers.
Ways to Use the Audit Practice Case
1. Emphasize the concepts you teach as you proceed in your auditing course. Students will do assignments shortly after they are discussed in class.
2. Emphasize the concepts after you have covered basic auditing concepts.
Computer Application Included
A computer disk containing selected client records and audit working paper files has been provided. All files use Excel spreadsheet software. The disk and instructions are filed in the back of the case for each student.
Evaluation and Testing
of Internal Control
· Assignments permit students to perform all steps needed to gain an understanding and evaluate the effectiveness of internal control in an audit.
· Sufficient information is provided in the permanent file to evaluate the control environment.
· Materials include tests of controls samples for detecting and evaluating exceptions and their effect on the audit.
· Flowcharts are included for students' use in evaluating internal control.
· An assignment to prepare management letter suggestions
Account Balance Testing
and Analytical Procedures
· Widespread use of analytical procedures is included throughout the case.
· Assignments include a wide variety of account balances to provide audit experience.
· Cash in banks and on hand
· Accounts receivable, bad debts, and advertising revenues
· Inventory of newsprint and publication sales
· Prepaid expenses and investments
· Property, plant and equipment, accumulated depreciation, depreciation expense, and gain or loss on disposal
· Accounts payable and accrued expenses
· Long-term debt and related interest expense
· Stockholders' equity
· Operating expenses
· Income tax expense and liability
Memo Writing Instructions
· Suggested memo writing instructions are provided for students.
· Examples of completed memos are provided in solutions for optional handouts.
Other Important Characteristics
of The Short Audit Case
· An employee fraud is included. Students must design analytical procedures and do inquiry to discover the fraud.
· Preliminary analytical procedures are illustrated. Percentages in the trial balance facilitate the preliminary analytical procedures.
· Two types of errors are included in the trial balance.
· Two alternative but similar tests of controls samples are included for purchases to permit professors to change assignments from term to term.
Estimated Completion Time
30-40 hours, with options for the Instructor to reduce time required.
