Running head: Beginning the Audit Report
Beginning the Audit Report
Gina Taylor Auditing ACC/546
Selina Ashworth
August 20, 2012
AUDIT ENGAGEMENT LETTER
August 20, 2012
Larry Lancaster
Apollo Shoes
10253 W. Higgins Rd. Ste 600
Rosemont, IL 60018
Dear Mr. Lancaster:
This letter is to confirm our understanding of the terms and objectives of our engagement and the nature and limitations of the services we will provide.
Services
We will audit the financial statements of Apollo Shoes as of December 31, 2011, and for the year then ending. We will also audit management’s assertion about the effectiveness of internal control over financial reporting at December 31, 2011. Upon completion of our audits, we will provide you with our
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Our responsibility as an auditor is limited to the period covered by our audit and does not extend to any later periods of which we are not engaged as auditors.
Our audit will include obtaining an understanding of your internal controls sufficient to plan the audit and to determine the nature, timing, and extent of audit procedures to be performed. An audit is not designed to provide assurance on internal controls or to identify reportable conditions, that is, significant deficiencies or material weaknesses in the design or operation of internal control. Accordingly, we have no responsibility to identify and communicate significant deficiencies or material weaknesses in your internal controls as part of this engagement, and our engagement cannot be relied upon to disclose the same. However, during the audit, if we become aware of such reportable conditions, we will communicate them to you. Prior to preparation and execution of this engagement letter, we discussed with you the fact that we provide clients with services specifically focused on identifying and addressing weaknesses in internal controls, and on searching for the existence of fraud within your company. We further explained the additional costs associated with such different levels of service. After consideration of such services, you have informed us that you wish to retain us to perform only the audit services described in this
The following memo aims to outline the results of the audit of Apollo Shoes, give recommendations to improve the company’s operations, and provide justification for our qualified opinion.
Accounts Receivable, Other Receivables, Allowance for Doubtful Accounts, Bad Debt ExpenseInventories and Reserve for Inventory Obsolescence
Performing internal tests of controls is intended to assess the operating effectiveness of those internal controls. Here the staff would select an area of control to test, perhaps inventory management and return policy. They would then look at the procedures that help prevent fraud or error, talk to management, and observe activities. They would notice there is very little control in place for this area. There is no management oversight or dock security measures, no direct recording of sales receipts, shipping labels, or matching to accounts receivable. This would be noted as an area of additional concern. The next stage is to perform substantive testing procedures, where the purpose is to collect audit evidence that the management assertions made in the financial statements are reliable and in accordance with GAAP. Since my staff is good, they would have noticed the company’s sales projections are weak in control and are overstated by around 11%. They would perform a substantive test of detail in this area by selecting a sample of items from the account balances and finding bank statements, invoices, and test of details of balances. They would likely see specifically where the over-projections are being made. Lastly, in finalization, they would compile a report to management detailing any important matters, evaluating the audit evidence, and considering the type of audit opinion that should be reported. Specifically here, they would
Anderson, Olds, and Watershed rely on Apollo Shoes management for the financial statements. In addition, Apollo Shoes management is responsible for internal control over financial reports, ensuring the company complies with applicable laws and regulations, providing all financial records and other related financial information to the firm, and providing a representation letter at the conclusion of the audit confirming management’s
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Apollo Shoes, Inc. as of December 31, 2008 and the results of its operations and cash in conformity with U.S. generally accepted accounting principles. The financial statements and related foot notes to said statements may be used for investors and management to make informed decisions on the health of the company. Also in our opinion, management’s assessment that Apollo Shoes, Inc. maintained effective internal control over financial reporting as of
1) Prepare common-sized balance sheets and income statements for Just for Feet for the period 1996-1998. Also, compute key liquidity, solvency, activity, and profitability ratios for 1997-1998. Given these data, comment on what you believe were the high-risk financial statement items for the 1998 Just for Feet audit.
This course is the first in a two-part series that deals with auditing a company 's financial reports, internal controls, and
However, as said auditor is not “actively” responsible after auditor’s report has been issued unless the conditions are satisfied.
To begin the audit, a review of previous 2 years of financial statements, provided by current or previous auditors for any unusual business transactions relating to revenue.
Scoping and Evaluation Judgments in the Audit of Internal Control over Financial Reporting 12.1 EyeMax Corporation . . Evaluation of Audit Differences
1235 Winner 's Road Write City, IN 12354 DONALDSON AND LUCIER, LCC has conducted an audit of Apollo Shoes, Inc. balance sheets, the retained earnings, cash flows, and other related statements of income for the year ended December 31, 2006/2007. Apollo Shoes Inc management is responsible for maintaining the effective internal controls that goes along with the financial statements and how well the accuracy is going to be. Donaldson and lucier, LLC has evaluated the effectiveness of the said controls and with everything to see the relevance in the timing, the substantive in quality, and the comprehensive in nature. The responsibility of our firm is to express an opinion that is supported by audit evidence in regards to the accuracy of the Apollo Shoes, Inc. financial statements. Our firm has conducted all audit related services that is accepted by the United States and the generally accepted auditing standards. The planning and performance done ensures that the audit was done to execute and obtain reasonable assurance that the financial statements published by Apollo Shoes, Inc. are free and clear of material misstatement. It is going to include the examination of the evidence and/or the supporting documentation for the amounts that are disclosed and included
Our firm Assurance service is performed by our professional CPAs, possessing the goal of improving Apollo Shoes financial information or the contest of the financial information so that management decision-making can make more informed and making better decisions. Our CPAs provide professions and independent opinions that reduce the information risk that will come from incorrect information. Our professional CPAs performing the audits are
When testing of internal controls indicates that there may be significant deficiencies, then the auditor
Auditors have the responsibilities as well as management to report internal controls. The auditors must examine closely management’s claim of effectiveness and also physically test the controls. After the examination, the auditors should express their opinion and any recommendations to fix any internal control weaknesses.