Apollo Shoes Case Study
Design tests of controls, substantive tests of transactions, and analytical procedures for the following Apollo Shoes cycles: o Inventory and warehousing cycle o Cash cycle 1. Abstract, Inventory and warehousing cycle (tests of controls) YOLANDA
2. Intro, Inventory and warehousing (substantive tests of transaction) AMY
3. Conclusion, Inventory and warehousing cycle (analytical procedures) JUSTINIA
4. Cash cycle (Test of controls) ANNABELLE
5. Cash cycle (substantive tests of transactions and analytical procedures) JENNIFER
Methodology for Designing Tests of Details of Balances for Cash in the Bank
Identify client business risks affecting cash in bank Phase I
Set tolerable misstatement and assess inherent risk for cash in bank Phase I
Assess control risk for cash in bank Phase I
Design and perform …show more content…
tests of controls and substantive tests of transactions for several cycles* Phase II
Design and perform analytical procedures for cash in bank balance Phase III
Design tests of details of cash in bank balance to satisfy balance related audit objectives Phase III
Audit procedures Phase
Sample size
Items to select
Timing
Cash is a major account that is constantly involved and affected in all the account of the balance sheet and financial statement.
For cash to be tested of the controls necessary to avoid fraud, it will have to look into the bank reconciliations of the cash accounts which can an affect many account of the balance sheet. The key cash accounts that maybe affect are the general cash account, imprest payroll account, and imprest petty cash fund. If fraud is an issue an audit may need to further test on the reconciliation procedures, proof of cash, and test of interbank transfers.
The auditor must attain enough evidence to determine the general cash account is comparable to the balance sheet of the end of year for the balance related objective. Areas that may need to be controls should be transaction cycles affecting the recording of cash receipts and disbursements and independent bank reconciliations. It is essential that adequate segregation of duties with the proper authorization for signing off on checks and wire transfer of funds can provide a reduction of control risk for upper management as an audit is being
performed.
Other factors that can decrease control risk when it concerns the bank reconciliation would be to apply the necessary audit controls that can prevent theft from occurring. A company like Apollo Inc can implement the following guidelines: * Compare cancelled checks with the cash disbursements records for date, payee, and amount.
• Examine cancelled checks for signature, endorsement, and cancellation.
• Compare deposits in the bank with recorded cash receipts for date, customer, and amounts.
• Account for the numerical sequence of checks, and investigate missing ones.
• Reconcile all items causing a difference between the book and bank balance and verify their propriety.
• Reconcile total debits on the bank statement with the totals in the cash disbursements records.
• Reconcile total credits on the bank statement with the totals in the cash receipts records.
• Review month-end interbank transfers for propriety and proper recording.
• Follow up on outstanding checks and stop-payment notices.
Implementing the above steps can prevent a risk of theft from occurring and will avoid the auditor to perform unnecessary testing of the companies controls. Where controls are functioning as described, it will help the auditor reduce tests of details and reduce the test of the process and of the procedures that are implemented.
The separation of responsibilities establishes deterrence for fraud in the payroll department and having develop a check and balance system can help prevent fraud from occurring. As an audit is being performed it would be essential that all then implemented controls and processes be reviewed and understood to be able to determine if any fraud has been committed.
Applying the following steps can help guide the company to establish a cash control system where it will prevent someone from trying to steal cash from the company.
2. Intro, Inventory and warehousing (substantive tests of transaction) AMY
3. Conclusion, Inventory and warehousing cycle (analytical procedures) JUSTINIA
4. Cash cycle (Test of controls) ANNABELLE
5. Cash cycle (substantive tests of transactions and analytical procedures) JENNIFER
Methodology for Designing Tests of Details of Balances for Cash in the Bank
Identify client business risks affecting cash in bank Phase I
Set tolerable misstatement and assess inherent risk for cash in bank Phase I
Assess control risk for cash in bank Phase I
Design and perform …show more content…
tests of controls and substantive tests of transactions for several cycles* Phase II
Design and perform analytical procedures for cash in bank balance Phase III
Design tests of details of cash in bank balance to satisfy balance related audit objectives Phase III
Audit procedures Phase
Sample size
Items to select
Timing
Cash is a major account that is constantly involved and affected in all the account of the balance sheet and financial statement.
For cash to be tested of the controls necessary to avoid fraud, it will have to look into the bank reconciliations of the cash accounts which can an affect many account of the balance sheet. The key cash accounts that maybe affect are the general cash account, imprest payroll account, and imprest petty cash fund. If fraud is an issue an audit may need to further test on the reconciliation procedures, proof of cash, and test of interbank transfers.
The auditor must attain enough evidence to determine the general cash account is comparable to the balance sheet of the end of year for the balance related objective. Areas that may need to be controls should be transaction cycles affecting the recording of cash receipts and disbursements and independent bank reconciliations. It is essential that adequate segregation of duties with the proper authorization for signing off on checks and wire transfer of funds can provide a reduction of control risk for upper management as an audit is being
performed.
Other factors that can decrease control risk when it concerns the bank reconciliation would be to apply the necessary audit controls that can prevent theft from occurring. A company like Apollo Inc can implement the following guidelines: * Compare cancelled checks with the cash disbursements records for date, payee, and amount.
• Examine cancelled checks for signature, endorsement, and cancellation.
• Compare deposits in the bank with recorded cash receipts for date, customer, and amounts.
• Account for the numerical sequence of checks, and investigate missing ones.
• Reconcile all items causing a difference between the book and bank balance and verify their propriety.
• Reconcile total debits on the bank statement with the totals in the cash disbursements records.
• Reconcile total credits on the bank statement with the totals in the cash receipts records.
• Review month-end interbank transfers for propriety and proper recording.
• Follow up on outstanding checks and stop-payment notices.
Implementing the above steps can prevent a risk of theft from occurring and will avoid the auditor to perform unnecessary testing of the companies controls. Where controls are functioning as described, it will help the auditor reduce tests of details and reduce the test of the process and of the procedures that are implemented.
The separation of responsibilities establishes deterrence for fraud in the payroll department and having develop a check and balance system can help prevent fraud from occurring. As an audit is being performed it would be essential that all then implemented controls and processes be reviewed and understood to be able to determine if any fraud has been committed.
Applying the following steps can help guide the company to establish a cash control system where it will prevent someone from trying to steal cash from the company.