When conducting an audit, one must develop a concrete understanding of a business and the type of environment the business operates in. The auditor must examine all the elements that make up the business and that also must include an understanding of the company’s internal controls. Once the auditor has a genuine understanding of the business; the auditor will establish material information, and create a series of procedures for the audit. In the instance of Apollo Shoes, an audit was conducted on the financial reports, the sales and collection cycle, and the payroll and personnel cycle. The final step of an audit design program would be to audit Apollo Shoes’ inventory and warehousing cycle and the cash cycle.
However, we, as in AOW offer a couple of other types of audits, which is an operational audit, and a compliance audit. An operational audit evaluates all of the operating procedures for efficiency, and can include more than just accounting. The evaluation can include the organizational structure, computer operations, production methods, marketing, and any other area. A compliance audit can be helpful for staying in compliance with the Department of Labor by examining wage rates with wage laws among other areas. The financial statement audit is the one I will be concentrating on by examining the financials to be sure Apollo Shoes in compliance with the required US accounting standards.
According to Arens, Elder, Beasley, (2012, p. 682) “factors affecting the complexity of the audit of inventory include: 1. Inventory is the largest account on the balance sheet. Inventory is also housed in different locations, which makes physical control and counting difficult. 2. Inventory valuation is also difficult when estimation of inventory obsolescence is necessary and when manufacturing costs must be allocated to inventory.
Engagement Letter Anderson, Olds, and Watershed, CPAs October 31, 2007 Mr. Larry Lancaster, President Apollo Shoes, Inc. 100 Shoe Plaza, Shoetown, ME 00001 Dear Mr. Lancaster: This will confirm our understanding of the arrangements for our audit of the financial statements of Apollo Shoes Inc. for the year ending December 31, 2007. We will audit the company’s financial statements for the year ending December 31, 2007, for the purpose of expressing an opinion on the fairness with which they present, in all material respects, the financial position, results of operations, and cash flows in conformity with accounting principles generally accepted in the United States of America. We will conduct our audit in accordance with auditing standards generally accepted in the United States of America. Those
The retained earnings statement reconciles the beginning and ending balances of the retained earnings. Some organizations sometimes combine it with the income statement. The final amount of the retained earnings is the ending balance, which indicates why the earnings may have increased or decreased for that period. If there is a net loss, the loss is deducted from the dividends in the retained earnings (Weygandt, 2008). As for the balance sheet, it shows the assets, liabilities, and stockholder’s equity for a specified date.
This letter serves to provide Mr. Lancaster with an overview of section 404 and other regulations that relate to the audit of internal controls as well as a synopsis of internal control risks that have and will be identified within Apollo Shoes Inc. This letter will also describe the responsibilities of our firm in regards to detecting and reporting fraud. In the SOX act, Section 404 suggests all publically traded organizations need to establish
Audit Program Apollo Shoes Audit December 2, 2013 A Sales and Collection Cycle Design test of controls -Examine Customer Files -Examine Customer Orders -Examine Sales Invoices, Bills of Lading, and Customer Orders for consistency -Examine sales and credit procedures manual -Examine customer orders for proof of customer approval -Examine sales invoices for supporting bill of lading and customer orders -Determine if monthly statements are sent to customers -Examine credit procedures -Examine tolerable misstatements in accounts receivables. Substantive Test of Transactions -Review customer files for completeness. -Review customer orders for customer approval and credit approval. -Review customer orders for timing of approval, shipments,
RCV Auditing firm will conduct part III of the audit of Apollo Shoes and will focus on two areas of concern, those being Inventory and warehousing cycle and Cash cycle. Within the scope of our audit we will review such items as receiving of materials, storage, purchase orders, shipping of orders. We will also review the company’s cash cycle such as receiving payments, cash posting, bank reconciliations and verification. Inventory and Warehousing Cycle There are several steps in the inventory and warehousing cycle of Apollo Shoes that will be reviewed for accuracy and completeness of policies and procedures in place. The first area that will be reviewed will be test of controls within the inventory and warehousing cycle such as: Inventory
Financial statements for each individual prior period presented shall be adjusted to reflect correction of the period-specific effects of the error. Zumiez’s ability to determine the materiality of the error also falls in line with the rules and regulations set forth. In FASB 250-10-45-27, determining materiality for the purpose of reporting the correction of an error, amounts shall be related to the estimated income for the full fiscal year and also to the effect on the trend of earnings. Changes that are material with respect to an interim period but not material with respect to the estimated income for the full fiscal year or to the trend of earnings shall be separately disclosed in the interim
Kudler Fine Foods Audit Proposal ACC/542 Kudler Fine Foods Audit Proposal Management of Kudler Fine Foods has requested the proposed audit schedules which will be discussed within this report. Distinguishing between the different types of audits to be used for each process will be defined, recommending the process most appropriate for each process and explaining how the audit will be performed and conducted, will each be explained and thoroughly discussed for management at Kudler Fine Foods. Events potentially having prevent reliance on auditing within the computer will also be a part of the audit schedules that have been requested. Providing the details mentioned will enable management to fully understand that process that will be taking