Audit Program Design Part Iii for Apollo Shoes Essay Example
Audit Program Design Part III for Apollo Shoes
Crystal Spencer
ACC/546
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
Crystal Spencer
ACC/546
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