Posted: August 2nd, 2024

Apollo Shoes Case, Auditing, accounting homework help

Question description

Review the Planning section, with emphasis on the Apollo Accounting and Control Procedures Manual and the Apollo Shoe Minutes. Complete the Internal Control audit section of the case.
Resources: Apollo Shoes Case Date: Sat, 19 JAN
2008 00:35:24 +0000
From: "Darlene Wardlaw"
Subject: Purchasing Cycle Bridge
Working Paper
I am glad that you don’t mind working on Saturdays.  Welcome to “Busy Season!”
Similar to what you did with the Revenue Cycle, I want
you to prepare a bridge working paper for the audit of Apollo Shoes as of
December 31, 2007, listing the major errors that could occur in the purchasing
system and to describe the test of controls procedures for auditing related
purchasing controls to determine whether reliable control exists.  I don’t think that Apollo has enough purchase
transactions that we need to rely on the controls (in other words, we’ll look
at them all), but we need to document our finding for our 404 work:
1.  In
the first column, use an index number (S-# or W-#) to indicate potential
strength or weakness.  If you have
time, you may want to prepare a purchasing cycle flowchart.  Not required, but could be helpful.
2.  In
the second column, describe the control activity (or lack thereof) that may
serve to prevent, detect, or correct errors or frauds.  Understand that Apollo may or may not have
the control activity in place.  If they
do, we may test the control if that is cost-effective.  If they don’t, we can propose the control as
a management letter comment.
3.  In
the third column, describe the audit implications of the strengths/ weaknesses
related to the control activities with respect to transactions or accounts
reported in the financial statements (e.g., the presence of a properly completed
purchase order check ensures that purchases are authorized).
4.  In
the fourth column, describe how specifically how (recalculation, reperformance,
inquiry and observation, etc.) you would test the control. 
5.  Finally,
add a fifth column for compensating audit procedures.  If the control activity is not in place, or
the control activity is in place but not effective, we need to determine what
audit procedure (i.e., a compensating test) we could use to catch them.  (For example, we can use customer confirmations
to test the validity of the transactions if we can’t rely on the client’s
controls.)
DW

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