Substantive Procedures for Asset Irregularities
September 17, 2012
The following will outline the procedures and steps necessary to detect irregularities that can occur in the accounts receivable, inventory and fixed assets of Apollo Shoes. The flowcharts will show how the use of internal controls is integral to the overall success of the organization. In the accounts receivable, the sales and billing processes are an area that would require attention. With the inventory representing a large portion of the assets at Apollo Shoes, special attention should be spent on the internal controls in that area. However, there also has to be emphasis on the fixed assets, such as vehicles, land, buildings, and the machinery required in the overall business operation. The sections that follow will provide a summary of the processes that are required to detect irregularities in those areas.
Accounts receivable fraud typically begins with errors within the billing process and can be examined by taking a sample of customer accounts receivable records and reviewing the original sales information to the customer balances. This process will uncover phony customers and receivables meant to strengthen the company financial statement. The sales and billing process must be precise for the accounts receivable to be correct (Wells, 2011). Another issue when the billing is corrected is the theft of the payments received on customer accounts. The theft normally occurs between several customer accounts where the first payment is taken and the next customer’s payment is applied to the first and the cycle continues. To keep this fraud activity going, it takes good record keeping; however this can be exposed quickly if proper customer records are kept and evaluated on a regular basis will be exposed quickly. Discounting can be another area for fraudulent activity within the accounts receivable...
Please join StudyMode to read the full document