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Apollo Shoes Audit program design: Acquisition and payment

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See attached case file.

Design tests of controls, substantive tests of transactions, and analytical procedures for the following Apollo Shoes cycles:

Acquisition and payment cycle

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Solution Summary

Your tutorial is 642 words and includes a draft audit program for testing controls and substantive testing for Apollo's purchasing and expenditure cycle. Note: The only thing that was really "custom" to Apollo was the suspicious shipment of very old odd sized shoes near year end. The rest was fairly typical for retail. Developing an audit program is part art and part science -- there is no perfect "solution" but this is a classic answer and where you would start.

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Control tests recommended:

1. Complete a walk-through of 5 judgmentally selected receipts of inventory. Verify the procedures in the client's memo by interviewing the workers. Is the segregation of duties still being observed?

2. Complete a walk-thorough of 5 judgmentally selected payments. Verify the procedures in the client's memo by interviewing the workers. Is the segregation of duties still being observed?

3. In order to test if the process for authorizing payments is working, judgmentally select 10 payments and check for:
a. Is it canceled?
b. Is the purchase requisition attached?
c. Is the receiving report attached and showing the same quantity invoiced and ordered?
d. Is the receiving report signed by the receiving clerk?
e. Does the quantity paid and the price paid match the invoice and the purchase requisition and purchase order?
f. Did the vendor offer a cash discount? If so, was the discount taken?
g. Was the invoice paid on time?

4. In order to test if the process for receiving goods is working, judgmentally select 10 receipts from last month and check ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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