Audit Program Design Part Iii

stock list and W arhousing rhythm method of birth control The scrutinise of the inventory and w atomic number 18housing cycle is designed to test inventory counts, processes, and operations. The classes of transactions in this cycle involve gross sales, value of inventory, cost of goods sold, sales returns and allowances, and estimates of allowance for slow moving inventory. Tests of Controls and Substantive Tests of minutesTable WK6-1 displays the interrelationships of the transaction related to inspect objectives, tests of controls, and substantive tests of transactions that should be approved during the audit process of Apollo Shoes, Inc. Table WK6-1. Inventory Warehousing cycles/second Tests of Controls and Substantive Tests of Transactions analyze Design (Arens, Elder, & amp Beasley, 2006) Inventory Apollo Shoes, Inc.Transaction-Related Audit Objectives Tests of Controls Substantive Tests of Transactions Transaction-Related Audit Objective Tests of Controls Substant ive Tests of Transactions Inventory as enter on tags exists (existence). * Select a hit-or-miss sample of tag numbers and identify the tag with that number attached to the actual inventory. * Observe whether front line of inventory takes place during the count. Existing inventory is counted and tagged, and tags are accounted for to make genuine none are absentminded (completeness). * Examine inventory to make sure it is tagged. * Observe whether movement of inventory takes place during the count. * Inquire as to inventory in other locations. Inventory is counted accurately (accuracy). * Recount clients counts to make sure the recorded counts are accurate on the tags (also check descriptions and unit of count, such as dozen or gross). * Compare physical counts with perpetual inventory master file. * Record clients counts for later(prenominal) testing. Inventory is classified correctly on the tags (classification). * Examine inventory descriptions on the tags and compare with the actual inventory for newfangled material, work-in-process, and finished goods. * Evaluate whether the percent of design recorded on the tags for work-in-process is reasonable. Information is obtained to make sure sales and inventory purchases are recorded in the proper period (cutoff). * Record in the audit files for subsequent follow-up the last receiving report number used at year-end. * Make sure the inventory for the above item was included in the physical count. The client has rights to inventory recorded on tags (rights). * Inquire closely consignment or customer inventory included on clients premises. * Be spiffy for inventory that is set aside or specially marked as indications of non-ownership. Analytical Procedures Analytical procedures whoremaster be performed several times during an engagement * In the planning phase to assist in find out the nature, extent, and timing of work to be performed. During the testing phase of the audit in conjunction wi th the audit procedures, and * During the completion phase of the audit as a final review for material mis storys for financial problems and to help the attendee take a final objective look at the financial statements that have been audited (Arens, Elder, & Beasley, 2006, p. 208). Arens, Elder, and Beasley (2006) inform that one of the most important analytical procedures for uncovering misstatements of the Inventory and Warehousing Cycle are analyze current with prior year.Analytical procedures for the balance sheet and income statement accounts in the Inventory and Warehousing Cycle are presented in Table WK6-2. Table WK6-2. Inventory and Warehousing Cycle Analytical Procedures (Arens, Elder & Beasley, 2006) cash Cycle The following tests of controls and substantive tests of transactions for the immediate payment Cycle discussed by Arens, Elder, and Beasley (2006) are designed to tick existence, completeness, accuracy, classification, timing, and summarization.Table WK6 -3 illustrates the design of test of controls and substantive tests of Cash Cycle. Tests of Controls and Substantive Tests of Transactions Cash Apollo Shoes, Inc. Transaction-Related Audit Objectives Tests of Controls Substantive Tests of Transactions Transaction-Related Audit Objective Tests of Controls Substantive Tests of Transactions Cash in the lingo as stated on the reconciliation exists (existence) * Receipt and tests of a assert confirmation. * cogent evidence account exists and balances are accurate. Existing cash in the bank is recorded (completeness). * Receipt and tests of a cutoff bank statement. * Tests of the bank reconciliation Cash in the bank as stated on the reconciliation is accurate (accuracy). * Tests of the bank reconciliation. * Extended tests of the bank reconciliation. * Tests for kiting. * Proof of cash. Cash in the bank is properly presented and disclosed (presentation and disclosure). * Examine minutes, loan agreements, and obtain confirmatio n for restrictions on the use of cash and compensating balances. * Review financial statements to make sure (a) material savings accounts and certificates of deposit are disclosed separately from cash in the bank,(b) cash restricted to certain uses and compensating balances are adequately disclosed, and (c) bank overdrafts are included as current liabilities. Cash receipts and cash disbursements transactions are recorded in the proper period (cutoff). * Cash receiptsCount the cash on hand on the last day of the year and by and by trace to deposits in transit and the cash receipts journal. Cash disbursementsRecord the last check number used on the last day of the year and subsequently trace to the outstanding checks and the cash disbursements journal * Trace deposits in transit to subsequent period bank statement (cutoff bank statement). * Trace outstanding checks to subsequent period bank statement. Table WK6-3. Cash Cycle Tests of Controls and Substantive Tests of Transactions Audit Design (Arens, Elder, & Beasley, 2006) Analytical Procedures Analytical procedures for the balance sheet and income statement accounts in the Cash Cycle are presented in Table WK6-4.Table WK6-4 Cash Cycle Analytical Procedures (Arens, Elder, & Beasley, 2006) References Arens, A. A. , Elder, R. J. , & Beasley, M. S. (2006). Auditing and assurance services an integrated approach (11th ed. ). Upper Saddle River, NJ Pearson. Louwers, T. J. , & Reynolds, J. K. (2007). Apollo shoes, inc. An audit case to accompany auditing and assurance services. University of Phoenix Custom Edition e-Text. New York, NY McGraw-Hill/Irwin. Retrieved from University of Phoenix,ACC546 Auditing website.