Audit Plan Design Portion II
Kendrick Cross, Teresita Gunn, Geri Franco, Heather Swayze
July 08, 2013
Sales and Collection Cycle
When engaged in auditing a public organization, such as Apollo Shoe Incorporation., an auditor must decide when to trust in the company's inside controls and when to ascertain additional testing methods are necessary to analyze control risks. The sales and collection cycle is rather an amazing fraction of the examine because this unique segment engages a multitude of paperwork and documents ranging from customer and sales instructions, shipping documents, credit memos, and basic journal articles; therefore , a functional comprehension from the diverse paperwork is essential. " Just before auditors can assess control risk and design testing of handles and hypostatic tests of transactions, they need to understand the business functions and documents and records in a businessвЂќ (Arens, Elderly, & Beasley, 2012, p. 443). Test of Controls
Taking a glimpse into the Apollo Shoes Incorporation., the organization appears to have executed control systems that match with the pursuing business functions essential to the sales and collection cycle: (1) digesting customer requests, (2) granting credit, (3) shipping items, (4) billing customers and recording product sales, and (5) processing and recording cash receipts (Arens, Elderly, & Beasley, 2012). However with consider to (a) processing and recording revenue returns and allowances, (b) writing off uncollectible accounts receivable, and (c) featuring for debt (Arens, Older, & Beasley, 2012), these business features are lack of from the Apollo Shoes work paper control systems and these deficiencies require identification. For instance right now there appear to have been completely some mistakes discovered in the sales and accounts receivable area and Darlene Wardlaw indicated that some product sales transactions were missing the bill of lading, which implies sales were improperly noted. Tests of controls could be devised to authenticate it is value, if the internal control is to have got copy 1 of the bill of lading attached with the delivery and copy 2 remitted with account copy 4 to the accounts receivable section, the test of control should be to designate a shipping staff to initial the bill of lading once generated with pre-number (Louwers & Reynolds, 2007). The follow-up for this would happen when the accounts receivable (" A/RвЂќ) office received duplicate 2 (with the initials). A chart could in that case be made that would record the pre-numbered bill of lading plus the employee initialing the assertion. In the event that legislation of lading arrived in the A/R division without proper recommendation, these could then always be flagged and researched intended for accuracy. Substantive Tests of Transactions
The auditor reviewing Apollo Shoes Inc conducted hypostatic tests upon the revenue and collection cycle. These types of tests involved evaluating revenue records to ascertain shipments built were to buyers rather than make believe (occurrence), ensuring sales orders were recorded (completeness), and verifying regardless of whether sales upon invoice data were for the goods basically shipped, were accurately charged and notated (accuracy). When ever examining the accounting and control procedures manual developed by Apollo Sneakers, there is a correlation between the interior controls to this of the economic assertions. For instance, sales invoices are released in numerical sequence, tested by an accounts receivable clerk to ascertain if almost all invoices had been received and if any will be missing they may be tracked down, and then further reviewed to acknowledge whether the products shipped agree with the items charged for appropriate quantity, cost, and other sales order conditions as appropriate. Analytical Methods
" Synthetic procedures employ comparisons and relationships to evaluate whether bank account balances or perhaps other data appear...