Audit Program Design Part Ii

AUDIT PROGRAM DESIGN – PART II

Audit Program Design – Part II

Matthew Montag, Dominique Payne, Benjamin Powers, and Shynelle Cade

ACC/546

March 26, 2012

Scott Phillips

March 26, 2012

Larry Lancaster

Chairman, President and CEO

Apollo Shoes Inc.,

123 Shoestring Lane

Shoetown, ME 00001

Dear Mr. Lancaster:

Anderson, Olds, and Watershed CPAs want to again thank the management of Apollo Shoes Inc. for allowing us to continue with the necessary auditing activities. AOW will work diligently to ensure the trust placed in our services is well-founded, and results in a desire for an ongoing auditing partnership for future needs. As requested, we have provided information on designing tests of controls, substantive tests of transactions, and analytical procedures for the sales and collection cycle, payroll and personnel cycle, and acquisition and payment cycle.

Sales and Collection Cycle

Based on previously conducted research, it is evident the controls over the sales and collection cycle at Apollo Shoes Inc. are greatly ineffective. Some of the research results found, to name a few, improperly recorded sales transactions because of missing bill of ladings, the lack of proper approvals causing issues with collection activities, and incorrect billing to customers due to overcharges and undercharges (University of Phoenix, 2007).

In an effort to prevent these same errors from occurring in the future, AOW will need to design tests of controls, substantive tests of transactions, and analytical procedures for the sales and collection cycle. These tests and procedures will help strengthen the current system of internal controls used at Apollo Shoes Inc.

According to Arens, Elder, and Beasley (2006), “A typical approach for sales is to study the client’s flowcharts, prepare an internal control questionnaire, and perform walkthrough tests of sales.” The internal controls currently in place provide information for...