Auditing Program Design Part II
The purpose of this part of the audit process for Apollo Shoes is to design tests of controls, substantive tests of transactions, and analytical procedures for the sales, collection, payroll, personnel, acquisition, and payment cycles. These test and procedures are with intent to attest operating effectiveness of internal controls of Apollo Shoes on the basis of documentation provided. It is with the understanding that with the performing of test and procedures an opinion can be formed but management of Apollo shoes is responsible for the maintenance and assessment internal controls of over financial reporting. The design of test of controls of the sales and ...view middle of the document...
4. Compare deposit amount listed on bank statement to deposit slips.
5. Review balance on reconciliation.
6. Compare payments customers indicate on balance confirmations to those listed on deposit slips for end of year 2007 and payments indicated on accounts receivable aged trial balance.
7. Verify the amounts of reconciliation, bank statement, deposit slips, and accounts receivable aged trial balance align.
Substantive Tests of Transactions
Sales Cycle: With the same rationale of attesting to accuracy of recorded sales with the test of controls notation of a customer indicating receipt of merchandise not requested, the steps of substantive test of transactions are:
1. Examine sample 1004345 for Anglonesia Rehabilitation Trace invoice back to shipping documents, sales and customer order.
2. Verify shipping amount is correct.
3. Verify if what is listed is sales order was shipped.
4. Verify if what listed on sales or is what Anglonesia Rehabilitation requested
Collection Cycle: In regards to collections, the same rationale for test of controls proving existence with the basis of Neutralizer having an understated balance, the substantive test for collections would be:
1. Review cash receipts journal for the amount of the cash receipt indicated by customers.
2. Review bank statement for deposits indicated.
3. Review deposit slips for list of deposits.
4. Verify amount customers indicate they payment is listed on deposit slips and are included on deposits listed on bank statement.
Sales Cycle: From the basis of negative press that Larry Lancaster addresses in the letter to shareholders the assumption is that sales will decrease. The analytical procedures to confirm expectations for the sales cycle will be:
1. Review the sales trial balances from end of year 2006 and 2007.
2. Divide the sales trial balances for 2007 by the 2006 trial balance.
3. Determine the percentage change and if it is positive to confirm expectation.
Collection Cycle: From the same basis for the analytical procedure for the Sales cycle and questions of collectability from Mall-Wart, it is the expectation that AR will balance will be larger than last year so the analytical procedure will be:
1. Review audited balance of AR for 2006 and the unaudited balance of 2007.
2. Determine if the AR balance has increase as expected.
Payroll and Personnel Cycle
The payroll and personnel cycle have a high level of internal control to ensure that employees are paid accurately and on time. This also ensures that the company files accurate and timely payroll returns with the government.
Tests of Controls
1. Review time cards for hourly employees to ensure that the time clock was used to record all hours worked.
2. Review time cards for hourly employees to confirm that the supervisor has approved them.
3. Examine the last payroll or employees listing which supervisors checked and...