March 12, 2012
Apollo Shoes, Inc. – Test of Controls, Substantive Test and Analytical Procedures
During the audit plan, there are three important cycles that will be of focus for our team, they are Sales and Collection Cycle, Payroll and Personnel Cycle, and Acquisition and Payment Cycle. There are five classes of transactions in the sales and collection cycle; sales cash receipts, sales return and allowances, charge-off uncollectible accounts, and estimate of bad debt expense. Under the sales class are four business functions and the under the other classes are one each. Business functions in the sale class cover, processing customer orders, granting credit, shipping goods, and billing customers and recording sales (Arens, Elder, & Peasley, 2006). We want to mention that payroll cycle has one class of transaction, but has four business functions; personnel and employment, timekeeping, and payroll processing, payment of payroll, and preparation of payroll tax returns and payments of taxes (Arens, Elder, & Peasley, 2006). Acquisition and payment cycle has three classes of transactions; acquisition of goods and services, cash disbursement and purchase returns and allowances and purchase discount. The first cycle has three business functions; processing purchase orders, receiving goods and services, and recognizing the liability (Arens, Elder, & Peasley, 2006). Finally, in order to conduct a fair and unbiased audit, our team have formulated and designed the test of controls, substantive test of transactions and analytical procedures for the sales and collection cycle, payroll and personnel cycle and lastly the acquisition and payment cycle. We feel these tools will be conducive in allowing us to give your organization a complete, accurate and reasonable opinion, while remaining in compliance with the guidelines set and generally accepted during this audit process.
Test of Controls... [continues]
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