Substantive Procedures for Cash Outflow Irregularities Essay

1123 Words May 4th, 2011 5 Pages
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
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Another substantive procedure to be employed in trying to uncover irregularities is the use of substantive analytical procedures over the completeness of expenses. Some additional procedures to consider include analyzing the aging of Apollo's payables balances, examining reports of debit balances, large or old suspense items, balances with no scheduled payment date, those of new suppliers, and reports of entries from unusual sources.

Payroll

Personnel and payroll are critical to most entities. Payroll schemes are a fraudulent disbursement in which a payment is made to an employee that is not due to them. Occupational fraud in the form of payroll schemes can drastically impact the financial status of a company. Payroll schemes are similar to billing schemes in that they are based on a fraudulent claim for payment (Wells, 2005, pp. 167).

Payroll schemes may be defined as occupational frauds in which a person who works for an organization causes that organization to issue a payment by making false claims for compensation. The three main categories of payroll fraud are ghost employee schemes, falsified hours and salary schemes and commission schemes. Ghost employee refers to a fictitious employee that does not work for the company. With the falsification of personnel and payroll records a paycheck will be issued to a ghost employee and will be cashed by the employee. Falsified hours and salary