Audit Program Design Part Iii for Apollo Shoes

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Audit Program Design Part III for Apollo Shoes
Crystal Spencer
September 24, 2012
Deborah Fitzgerald Thomas

Sloan and Spencer Auditing Firm during phase III of Apollo Shoes audit plan, we will focus in two key cycles, which are the following: inventory and warehouse cycle and cash cycle. It is important to understand that are six types of transactions in the inventory and warehouse cycles which are: receive raw materials, store raw materials, process purchase order, and process of goods, store completed goods, and ship completed goods. In addition, it is important understand that cash is chiefly important and exceedingly vulnerable to fraudulent activity this is why an auditor will need to be very careful in assessing the risk of the cash account. In addition, the company cash account is part every cycle except the inventory and warehousing cycle (Arens, 2006). Sloan and Spencer Auditing Firm are responsible to conduct an unbiased and fair audit; this firm will conduct these procedures and tests according to the PCAOB auditing standards. However, there is no absolute assurance that errors or misstatements will be discovered. Analytical Procedures for Inventory and Warehousing Cycle

In analytical procedures for inventory and warehousing cycle the auditor will: •Compare the current gross margin, checking for over and understatement of cost of goods sold and inventory. •The inventory turnover, cost of goods sold divides by average inventory. •The units cost of inventory

The total inventory value, check for misstatements in a set of units cost and data, which have an effect on the cost of goods sold and inventory •The current manufacturing cost, variable cost should be adjusted for changes in volume in prior years (Arens, 2006). Test Controls

Test of control and substantive test of transaction, inventory report should match physical inventory counts, and value of inventory matches general ledger and is correct (detail tie-in).Compare the inventory warehouse report to the general ledger, and look for mathematical mistakes. * Enter in test transaction to see if the inventory values are placed correctly to the general ledger * Inventory as recorded on tags do exists

* Decided on a random sample of the tag numbers and then associate the tag with the number * Test of control and substantive test transactions that is assign to match the inventory * Examine if there was any changes of inventory taking place during the count * Test of control and substantive test of transactions that the inventory in the warehouse exists * Taken a random sampling of inventory and match recorded counted * Observe inventory counting and check is anything was move to a different place * Inventory and warehouse are physically controlled and safe from theft misuse * Examine raw materials storage area to determine whether the inventory is protected from theft or misuse. For example companies have lock on access doors to restricted area for some employees like the store room’s doors and manager offices. * Proper classification of the work in process, completed goods and raw material * Ensure that inventories received are processed daily and included in the receiving reports * Inventory is classified correctly on the tags

* Examine inventory information on the tags and compare with correct inventory for work-in-progress, completed goods and raw material * Evaluate whether the completion percent is recorded on the tags for WIP is realistic * Match purchases with the naming convention used for a sample of purchases * Make sure existing inventory is valid, and all tags are accounted for and are not misplaced * Verify that all inventories are tagged

* Account for all used and unused tags to determine there are no accidental or purposely lost tags * Monitor whether the other locations. * Account for all...
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