Audit Program Design Part 2

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Audit Program Design Part II
Kendrick Cross, Teresita Gunn, Geri Franco, Heather Swayze
July 08, 2013 Joseph Oloyede

Sales and Collection Cycle

When engaged in auditing a public firm, such as Apollo Shoe Inc., an auditor must determine when to trust in the company’s internal controls and when to ascertain auxiliary testing methods are obligatory to analyze control risks. The sales and collection cycle is rather a substantial fraction of the audit because this unique segment employs a multitude of documentation and records ranging anywhere from customer and sales orders, shipping documents, credit memos, and general journal entries; therefore, a working
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If not approved, then the customer is expected to pay up front. In the event the sales order is denied credit approval, there ought to be a record clarifying those order numbers that are credit and those that are paid in advance. This would provide a checks and balance system while also supplying traceability. Personnel and Payroll Cycles The personnel and payroll cycle includes the hiring of employees, recording hours worked, withholding and, recording of taxes, distributing payment for work performed, and properly documenting the termination of employees. Payroll can be a significant expense for a company and without proper internal controls can be vulnerable to fraud. Some common types of the fraud within the payroll cycle consist of ghost employees, claiming unworked hours, and pay rate alteration. The objective of a payroll audit is to determine if the current balances in the audit period are fairly stated and in accordance with accounting principles. According Arens, Elder, and Beasley, “Tests of controls and substantive tests of transactions procedures are the most important means of verifying account balances in the payroll and personnel cycle” (2012, p. 664). An

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