Sales and Collection Cycle The sales and collection cycle will entail researching of Apollo Shoes journal of sales in search of abnormal transactions and records. The process of this audit test procedures begins when a customer purchases a product from Apollo, and ends with the receipt of the complete payment from the customer. The test of controls the auditors will perform comprises the completeness, accuracy, and classification of transactions and will include accounting for a sequence of shipping documents, observing whether monthly statements are sent, and examining document packaging for internal verification. It will also test of controls for a sequence of shipping documents and the substantive tests will be to compare the date of recording the sale in the sales journal with duplicate sales invoices and bills of lading. Finally, the test of controls for the posting and summarization objective will be to examine evidence that the accounts receivable master file is reconciled to the general ledger and observe whether monthly statements are sent to customers.
There are four types of transactions involved in the inventory and warehousing cycle of Apollo Shoes, Inc., ordering of goods for sale, receipt of the ordered goods, storage of the merchandise, and the shipping of goods to customers. Each of these processes requires that the auditor verify that adequate controls are maintained and that the proper documents are in place for each portion of the process. Therefore, the audit will involve analytical procedures, test of controls and substantive tests on each part of the cycle. Analytical procedure Given the fact that the inventory process will vary between companies, Anderson Olds and Watershed will obtain a thorough understanding of the entire flow of goods from purchase to shipment within the Apollo Shoes organization. Analytical procedures “examine the relationship of inventory account balances with other financial statement accounts” [ (Arens, Elder, & Beasley, 2006, p. 689) ] and are used to “assess the reasonableness of inventory-related balances” [ (Arens, Elder, & Beasley, 2006, p. 689) ].
GAAP cover such things as revenue recognition, balance sheet item classification and outstanding share measurements. Companies are expected to follow GAAP rules when reporting their financial data via financial statements. If a financial statement is not prepared using GAAP principles, be very wary! Therefore, you still need to be careful and review other financial reports which can be altered. Convergence means that the U.S. Financial Accounting Standards Board (FASB) and the Independent Accounting Standard-setting Body (IASB) would continue working together to develop high quality, compatible accounting standards over time.
This also includes educating staff about the responsibilities of maintaining costs. What are the reports that can be used for financial planning in an organisation? Profit and Loss Balance sheet Revenue and Expenditure report Cash flow statement Debtors and Creditors reports What is the process for preparing budgets or other financial plans? 1. Identify data that needs to be collected.
Some of its other objectives include maintaining AA bond ratings, minimizing interest expenses on debts, and maximizing future possibilities of borrowing to enable continual growth. ANALYSIS To fully appreciate the present scenario and the implications of the restructuring exercise at the Thomas J. Lipton Company, we will give a brief recap of the product, function and organizational structure of the company. Each product line
The accounts are assessed base in accordance with the generally accepted accounting principles (GAAP) to ensure they are represented fairly. Tests of Controls The test of controls purpose for the acquisition and payments cycle is for the detection of understatements. Tests of controls for this cycle would include: 1. Verify that correct documents (purchase order, purchase requisition and vendor’s invoice) are prepared and attached to the voucher and examined for existence when submitted to appropriate departments. 2.
There are several issues to consider when comparing the financial ratios of a public company to the industry averages. It is important to allow for any material differences in accounting policies between the specific company and the industry norms. It is also important to determine whether ratios were calculated before or after adjustments were made to the balance sheet or income statement. (Atrill & McLaney, 1997) It is also extremely important that one make sure that the financial data was developed using comparable accounting methods, classification procedures, and valuation bases. I have chosen to analyze Branch Banking & Trusts financial ratios and compare them to industry averages.
Audit Process December 15, 2014 Apollo Shoes, Inc. 100 Chase Way Concord, NH 12345 To: Board of Directors, Apollo Shoes Inc. Thank you for trusting Williams, Taft, and Franklin to be Apollo Shoes Inc. Auditors. This letter is an explanation of the terms and processes of how WTF conducts an audit. This is not a letter of agreement, but more for educational purposes.
The audit objectives auditors use to perform year-end sales cutoff tests are to determine if the information they obtained by the confirmation reduces the audit risk level. This has a heavy emphasis on the materiality of the account being assessed, and the lower the audit risk the better. The sales cutoff tests are usually performed based on the existence and completeness assertions regarding the accounts receivable balance (SAS No. 67, AU Section 330.09). 2.
It would need to be reviewed and signed off on by all responsible officers. A step that should be included is periodic internal audits of the financial data. An audit of that nature would review the accounting records and supporting documentation to verify accuracy of the financial records. You could do this by employing an Internal Auditor or my having McGladrey, LLC. complete an audit of all the financial data on a yearly basis.