Wednesday, January 2, 2019
Audit Program Design Part Iii
caudex and W behousing round of drinks The scrutinize of the inventory and warehousing vibration is designed to test inventory counts, processes, and operations. The classes of minutes in this cycle include gross revenue, observe of inventory, cost of goods sold, sales returns and allowances, and estimates of allowance for tedious moving inventory. Tests of Controls and of the essence(p) Tests of Transactions give in WK6-1 displays the interrelationships of the transaction cogitate to audit preys, tests of controls, and substantive tests of legal proceeding that should be approved during the audit process of Apollo Shoes, Inc. Table WK6-1. armory entrepot oscillation Tests of Controls and strong Tests of Transactions size up purport (Arens, Elder, & group A adenosine monophosphate Beasley, 2006) Inventory Apollo Shoes, Inc.Transaction-Related Audit impersonals Tests of Controls meaty Tests of Transactions Transaction-Related Audit Objective Tests of Controls Subs tantive Tests of Transactions Inventory as save on tags exists (existence). * Select a ergodic s adenylic acidle of tag numbers and draw the tag with that number attached to the echt inventory. * Observe whether movement of inventory takes get in during the count. real inventory is counted and tagged, and tags are accounted for to touch on positive(predicate) n wholeness are deficient (completeness). * ascertain inventory to make undisputable it is tagged. * Observe whether movement of inventory takes view during the count. * Inquire as to inventory in other locations. Inventory is counted accurately (accuracy). * some(prenominal)ise clients counts to make sure the put down counts are accurate on the tags (also check descriptions and unit of count, such as dozen or gross). * Compare forcible counts with perpetual inventory master file. * magnetic disc clients counts for sequent interrogation. Inventory is classified correctly on the tags (classification). * read inventory descriptions on the tags and compare with the tangible inventory for raw material, work-in-process, and finished goods. * quantify whether the percent of completion recorded on the tags for work-in-process is reasonable. Information is obtained to make sure sales and inventory purchases are recorded in the becoming design (cutoff). * Record in the audit files for subsequent follow-up the blend in receiving report number used at year-end. * Make sure the inventory for the above item was included in the bodily count. The client has rights to inventory recorded on tags (rights). * Inquire about consignment or customer inventory included on clients premises. * Be rakish for inventory that is set aside or specially marked as indications of non-ownership. uninflected Procedures analytic procedures can be performed several times during an engagement * In the training phase to assist in determine the nature, extent, and timing of work to be performed. Duri ng the testing phase of the audit in conjunctive with the audit procedures, and * During the completion phase of the audit as a final analyse for material misstatements for monetary problems and to help the auditor take a final objective look at the financial statements that lose been audited (Arens, Elder, & adenineamp Beasley, 2006, p. 208). Arens, Elder, and Beasley (2006) explain that one of the most important analytical procedures for denudation misstatements of the Inventory and Warehousing round of golf are comparing modern with prior year. uninflected procedures for the brace sheet and income statement accounts in the Inventory and Warehousing Cycle are presented in Table WK6-2. Table WK6-2. Inventory and Warehousing Cycle Analytical Procedures (Arens, Elder &amp Beasley, 2006) hard currency Cycle The side by side(p) tests of controls and substantive tests of transactions for the Cash Cycle discussed by Arens, Elder, and Beasley (2006) are designed to reckon e xistence, completeness, accuracy, classification, timing, and summarization.Table WK6-3 illustrates the design of test of controls and substantive tests of Cash Cycle. Tests of Controls and Substantive Tests of Transactions Cash Apollo Shoes, Inc. Transaction-Related Audit Objectives Tests of Controls Substantive Tests of Transactions Transaction-Related Audit Objective Tests of Controls Substantive Tests of Transactions Cash in the posit as stated on the reconciliation exists (existence) * Receipt and tests of a chamfer confirmation. * Proof account exists and balances are accurate. Existing immediate payment in the brim is recorded (completeness). * Receipt and tests of a cutoff lodge statement. * Tests of the bank reconciliation Cash in the bank as stated on the reconciliation is accurate (accuracy). * Tests of the bank reconciliation. * blanket(a) tests of the bank reconciliation. * Tests for kiting. * Proof of cash. Cash in the bank is properly presented and disc losed (presentation and disclosure). * Examine minutes, loan agreements, and obtain confirmation for restrictions on the use of cash and compensating balances. * Review financial statements to make sure (a) material savings accounts and certificates of deposit are disclosed respectively from cash in the bank,(b) cash curb to certain uses and compensating balances are adequately disclosed, and (c) bank overdrafts are included as current liabilities. Cash receipts and cash disbursements transactions are recorded in the proper period (cutoff). * Cash receipts total the cash on hand on the delay day of the year and afterward trace to deposits in transit and the cash receipts diary. Cash disbursementsRecord the last check number used on the last day of the year and afterwards trace to the outstanding checks and the cash disbursements journal * Trace deposits in transit to subsequent period bank statement (cutoff bank statement). * Trace outstanding checks to subsequent period ban k statement. Table WK6-3. Cash Cycle Tests of Controls and Substantive Tests of Transactions Audit Design (Arens, Elder, &amp Beasley, 2006) Analytical Procedures Analytical procedures for the balance sheet and income statement accounts in the Cash Cycle are presented in Table WK6-4.Table WK6-4 Cash Cycle Analytical Procedures (Arens, Elder, &amp Beasley, 2006) References Arens, A. A. , Elder, R. J. , &amp Beasley, M. S. (2006). Auditing and assurance services an integrated climax (11th ed. ). Upper Saddle River, NJ Pearson. Louwers, T. J. , &amp Reynolds, J. K. (2007). Apollo shoes, inc. An audit case to cooccur with auditing and assurance services. University of Phoenix Custom version e-Text. New York, NY McGraw-Hill/Irwin. Retrieved from University of Phoenix,ACC546 Auditing website.