Audit Program Design Part Ii Essay

1588 words - 7 pages

Audit Program Design Part II

Audit Program Design Part II
The audit program design introduces the concepts of (a) Adequate designed tests of controls, substantive tests of transactions, and analytical procedures for the Apollo Shoes sales and collection cycles, (b) Adequate designed tests of controls, substantive tests of transactions, and analytical procedures for the Apollo Shoes payroll and personnel cycles, (c) and adequate designed tests of controls, substantive tests of transactions, and analytical procedures for the Apollo Shoes acquisition and payment.
Test of Controls for Sales and Collection Cycles
Apollo Shoes has internal controls in place for sales and collections ...view middle of the document...

The general ledger supervisor approves all monthly summary entries before they are posted to the general ledger.

6. The treasurer approves all cash refunds and allowance credit memos for sales returns, after initiation by customer relations personnel. The marketing vice president shall periodically analyze sales activity by product lines in comparison to budgets and forecasts and prior years’ activity.
(Louwers & Reynolds, 2007)

Test of Transactions for Sales and Collections
To test transactions for sales and collections, we have randomly selected 10 sales transactions each month out of the year. We checked all invoices to make sure they are all accounted for and that they were posted in the correct customer account and period. We checked debits and credits to make sure that they were properly documented, noted and approved. We checked to make sure shipping documents coincided with sales transactions and also checked sales price amounts with sales invoice amounts to make sure they matched. When these tests were completed we found the following deviations:
1. “No credit approval” means that the expected credit approval notation could not be found in the documents.
2. When “Wrong quantity billed” appears, a description of the effect follows.
3. “CM (date)” means the customer notified Apollo of an error and a credit memo was issued on
the subsequent date. All credit memos generate debits to a sales returns account and credits to
accounts receivable.
4. “Missing BL”means the bill of lading (shipping document) could not be found.
5. “Wrong price” means the clerks put the wrong unit price on the invoice and billed the customer incorrectly.
6. “Arithmetic error” means we found the invoice multiplied and added to show an incorrect total.
7. We found purchase orders from each customer except for the December shipment to Mall-
Warts. Because there was no purchase order, I looked at the sales and shipping documents.
The cost of the inventory shipped was $3,169,145.10.
(Louwers & Reynolds, 2007)
Apollo Shoes, Inc. ICC-2
Revenue Cycle Test of Controls Prepared by LS
For Year Ended 12/31/2013 Reviewed by

Deviation Sample # Invoice Month Day Amount Customer Deviation

1 21 39918 Sep. 23 $35,029 Nuke Me Wrong quantity. Overcharge $250. CM Nov. 5. |
2 37 39357 Aug. 28 $11,326,574 Mall-Warts No credit approval. Unpaid as of Dec. 31. |
3 50 35669 Apr. 18 $2,447,119 Mall-Warts No credit approval. Paid in full on time. |
4 51 41612 Dec. 10 $2,165,501 Run For Your Life No credit approval. Unpaid as of Dec. 31 |
5 52 42056 Dec. 28 $730,588 Shoe Shack Wrong quantity. Overcharge $200. No CM. Unpaid. |
6 61 40812 Nov. 3 $3,051,755 Neutralizer No credit approval. Unpaid as of Dec. 31. |
7 66 39684 Sep. 13 $139,246 Imelda's Closet No credit approval. Paid in full on time. |
8 67 33762 Feb. 21 $1,478,296 Mall-Warts No credit approval. Paid in full on time. |
9 72 40004 Sep. 27 $35,029 Nuke Me Wrong quantity....

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