Substantive Procedures for Cash Outflow Irregularities
Substantive Procedures for Cash Outflow Irregularities
Substantive Procedures for Cash Outflow Irregularities
There are many irregularities that can arise within the different accounting departments at Apollo Shoes. An audit program will be designed according to the three cycles that will be outlined below. The first cycle that will be discussed is cash, then accounts payable and finally the payroll function. These cycles will be evaluated for substantive procedures for Apollo Shoes and detect irregularities for each section and an appropriate audit program will be designed for each department.
Cash
At Apollo Shoes irregularities or cash schemes, which could occur in the audit cycle of cash include fraudulent disbursement schemes and cash receipt schemes. Fraudulent disbursement schemes are those in which a distribution of funds is made from some company account in what appears to be a normal manner. Cash receipts schemes is the outright stealing of cash (Wells, 2005, p. 77).
Cash is the only account that is included in several cycles. The audit of cash balances is the last studied because the evidence accumulated for cash depends heavily on the results of the tests in other cycles. Auditors for Apollo Shoes will have to group the cash accounts into cycles to simplify the audit plan. The cash account appears in the cycles: finance and investment, production cycle, acquisition and expenditure, and revenue and collection cycle. The substantive audit program will consist of several audit programs related to each cycle (Louwers, Ramsay, Sinason & Strawser, 2007, pp. 79-80).
Substantive procedures for detecting irregularities in cash receipts include the following:
▪ review the cash receipts journal and master file for unusual transactions; ▪ trace cash receipts entries from the cash receipts journal entries to the bank statement; ▪ prepare a proof of cash receipts; ▪ obtain a
Substantive Procedures for Cash Outflow Irregularities
There are many irregularities that can arise within the different accounting departments at Apollo Shoes. An audit program will be designed according to the three cycles that will be outlined below. The first cycle that will be discussed is cash, then accounts payable and finally the payroll function. These cycles will be evaluated for substantive procedures for Apollo Shoes and detect irregularities for each section and an appropriate audit program will be designed for each department.
Cash
At Apollo Shoes irregularities or cash schemes, which could occur in the audit cycle of cash include fraudulent disbursement schemes and cash receipt schemes. Fraudulent disbursement schemes are those in which a distribution of funds is made from some company account in what appears to be a normal manner. Cash receipts schemes is the outright stealing of cash (Wells, 2005, p. 77).
Cash is the only account that is included in several cycles. The audit of cash balances is the last studied because the evidence accumulated for cash depends heavily on the results of the tests in other cycles. Auditors for Apollo Shoes will have to group the cash accounts into cycles to simplify the audit plan. The cash account appears in the cycles: finance and investment, production cycle, acquisition and expenditure, and revenue and collection cycle. The substantive audit program will consist of several audit programs related to each cycle (Louwers, Ramsay, Sinason & Strawser, 2007, pp. 79-80).
Substantive procedures for detecting irregularities in cash receipts include the following:
▪ review the cash receipts journal and master file for unusual transactions; ▪ trace cash receipts entries from the cash receipts journal entries to the bank statement; ▪ prepare a proof of cash receipts; ▪ obtain a
References: Arens, A.A., Elder, R.J., & Beasley, M.S. (2006). Auditing and Assurance Services. An Integrated Approach, Eleventh Edition. Retrieved from University of Phoenix eBook Collection database. Louwers, T.J. & Reynolds, J.K. (2002). Apollo shoes casebook. New York, New York: McGraw-Hill. Louwers, T.J., Ramsay, R.J., Sinason, D.H., and Strawser, J.R. (2007). Auditing and Assurance Services. The McGraw-Hill Companies. Wells, J.T. (2005). Principles of Fraud Examination. Retrieved from University of Phoenix eBook Collection database.