Apollo Shoes Audit Program Design
Audit Program Design Part III
ACC/546
August 6, 2012
Audit Program Design Part III
The inventory account is one of the largest accounts on a financial statement; it can makes physical controls difficult; and it is one of the most time consuming part of an audit, according to Arens, Elder, & Beasley. The amount of cash flowing into and out of and the cash account is many times larger than any other assets. This makes cash highly susceptible to theft. As such, Anderson, Olds, and Watershed (AOW) will focus on designing tests of controls, access the control risk, substantive tests of transactions, analytical procedures, and test the details of balances in the inventory cycle, warehouse cycle, and cash cycle at Apollo Shoes, Inc (Arens, Elder, & Beasley, 2012).
The purpose and overall objective to auditing the inventory and warehouse cycle as well as the cash cycle is to provide assurance to the stakeholders and stockholders of the company that the financial statements are fairly account for raw materials, work-in process, finished goods inventory, cost of goods sold. To ensure the company financial statements are presented fairly, AOW will obtain an understanding of the industrial in which the business operates. The type of evidence Anderson, Olds, and Watershed requires are documentations, inquiries of the client analytical procedures, observation, reperformance, recalculation, physical examination and confirmation (Arens, Elder, & Beasley, 2012). Below is Illustration 1, an internal control questionnaire to assist auditors.
Apollo Cash Handling Questionnaire
Illustration 1
Question
Comments
An essential element of control over cash is segregating among employees the duties of cash handling, reconciling, and maintaining accounting records.
When receiving payments by mail, is a mail log maintained by hand in ink?
Does someone independent of the cash receipts process prepare the mail log?
Does cashier stamp checks with restrictive endorsement immediately?
Are cash drawers assigned to one person?
AOW will audit Apollo’s cash accounts by designing and performing audit tests on the cash accounts. In testing the year-end balance in the cash account, AOW will accumulate sufficient appropriate evidence to