Substaaantive Procedures for Outflow Irregularities

Substantive Procedures for Cash Outflow Irregularities

To detect irregularities in Apollo Shoes, an efficient audit program for the audit cycles will be needed. Cash, accounts payable, and payroll will be investigated using substantive procedures during the process. Fraudulent activity can damage a company beyond repair so it is very important to design an audit program to discover any signs of fraud or abuse. Knowing how each of the cycles operates will help in the search for fraudulent activity. Each of the audit cycles will be investigated using knowledge of common schemes used for each cycle and using substantive procedures for detecting irregularities for each audit cycle.

Cash Cycle

When considering the cash outflow of the cash cycle there are two major areas which are called skimming and cash larceny. Skimming consists of taking funds from a victim prior to it being entered into the accounting system. This fraudulent activity can happen at any time that funds enter into a business. The next topic is cash larceny. The definition of cash larceny is the intentional taking away of an employer’s cash without consent and against the will of the employer (Wells, 2005). This scheme is different from other cash frauds as this is broken down into two schemes. These are the fraudulent disbursement scheme and the cash receipts scheme. A fraudulent disbursement scheme is when a distribution of funds is made but appears to be a normal transaction. Cash receipts scheme is different because it is blatant stealing of funds.

Skimming Reviewed? Notes

Make sure that there are receipts for all transactions.

Make sure that receipts match all transactions.

Determine if register tape matches sales.

Determine if sales occurred during business operational hours.

Determine if all off site services were recorded.

Determine if payments were made by currency or by check.

Confirm if all records are the original records.

Cash Larceny

Determine if the...