ACC 491 Week 4 Team Assignment: Apollo Shoes Case - Revenue and Purchasing Cycle Audit - Solved Assignments | Accounting

Preview (4 of 11 Pages)

100%

Purchase to unlock

Loading page image...

Acc 491Week 4 Memo1ACC 491 Week 4 Team Assignment: Apollo Shoes Case-Revenue andPurchasing Cycle AuditBased on the Apollo Shoes Case Assignment, critically analyzethe controlweaknesses identified in the Revenue and Collection Cycle and their potentialimpact on the financial reporting process. In your response, explain the specificareas where Apollo Shoes' internal controls are deficient, the audit implications,and the recommendations provided to improve the control procedures.Additionally, discuss the importance of effective internal controls in ensuring theaccuracy and reliability of financial statements.Your response should be between 700-1000 words.

Loading page image...

Acc 491Week 4 Memo2ACC 491Week 4Team Assignment Apollo Shoes Case AssignmentDate:MemorandumTo:Audit FileCC:SantosAlarcon, Jr.From:B TeamDate:2/12/2025Re:Apollo Accounting and Control Systems: Revenue and Collection CycleDetails of Control Issues Encounteredin the Revenue and Collection CycleObjectives:Apollo’s control procedures were tested to obtain control evidence aboutthe validity, authorization, accuracy, and proper period recording of recorded sales. Theaccuracy of classification of sales postings to individual customer accounts receivablewas also tested. Systems tested included authorization, segregation of duties,information processing controls, such as general, application, and controls over thefinancial reporting process, physical controls, performance reviews, and controls overmanagement discretion in financial reporting.Our objective was to perform enough in-depth auditing to provide assurance abouterrors and fraud in the accounts. The internal controls were tested for effectivenessusing samples of transactions. This was done in accordance with audit standards.Results:The revenue cycle test of controls for year end 2007 resulted in 51 deviationsof 120 sample transactions. 15 of those transactions resulted in credit memos forinaccurate pricing or quantities billed. The majority of credit memos were processed inthe third quarter and none were processed in the first half of the year. 31 had no creditapproval of which 10 are outstanding at the date of this audit. The total outstanding

Loading page image...

Acc 491Week 4 Memo3invoices without credit approval total over $27 million. Several bills of lading weremissing and a couple arithmetic errors were made.Response: The unreliability of Apollo’s revenue and accounts receivable controlsrequired the audit team to do more extensive testing. Positive or negative confirmationswere needed on most accounts. Apollo customers were asked to verify total sales duringthe year if not current at the date of the audit.The finding that all credit memos processed were in the second half of the year indicatethat control procedures were not uniform for the year. Additionally, Decemberdeviations are potential cause of misstatement in the financial statements. Managementis advised to implement and follow control procedures throughout the year.Credit approval is not being done as required and results in collection issues. Creditapproval and timely collection procedures will reduce the financial problems as wereseen in the fourth quarter.Missing bills of lading, substantial arithmetic errors with delay in correction, anddeviations resulting in credit memos for overcharges only (no undercharge errors found)are red flags for potential fraudulent transactions. The missing bills of lading suggestimproperly recorded sales, the lack of mixture of over and under charges, and the lagtime between errors and credit memos are suggestive of misstatement and possiblyfraudulent activity.Recommendations:Bridge working papers summarize Apollo’s strengths andweaknesses. Apollo is advised to implement and maintain effective control proceduresthat can be adhered to throughout the year.Some recommendations include:•Pre-numbered bills of lading with location and explanation of missing BLsdetermined.•Credit approvals should be done for every transaction regardless of history orsize.•Sales orders should be secured properly and numbered reducing the risk missingor altered sales orders.•Create an electronic signature such as a PIN number for telephone orders toensure that the customer placing the order is responsible for payment.•Payment terms should be indicated to customers at time of purchase.•Collection procedures should be implemented to increase cash flow.

Preview Mode

This document has 11 pages. Sign in to access the full document!

Report

ACC 491 Week 4 Team Assignment: Apollo Shoes Case - Revenue and Purchasing Cycle Audit

Study Now!

Document Details

Related Documents

ACC 491 Contemporary Auditing I Week 1 GAAS

ACC/491 Assessing Materiality and Risk Simulation

ACC 491 Contemporary Auditing I Week 2 Textbook Exercises

ACC 491 Auditing, Attestation, and Assurance Services Paper

ACC 491 Contemporary Auditing I Week 2 Textbook Exercises

ACC 491 Internal Controls, Audit Techniques, and Sampling Methods in Auditing

Accounting 491 Audit Sampling and Evaluation of Mt. Hood Furniture's Inventory

ACC 491 Analytical Procedures and Control Risk Assessment in Auditing Week 4 Individual Assignments

Accounting

Master Managerial Accounting Techniques

Company

Explore

Study Tools