Instructions and Deliverables
1. The sales journal, sales orders, shipping documents, invoices and price list are available on in canvas
2. An Audit Program has been prepared for you by the Audit Partner. You are asked to determine materiality based on total sales. This is a judgment so you must defend your choice in the memo.
3. Complete the working papers (memo and worksheet) requested by the partner. For every deviation noted, explain it fully in a referenced note so that a person who does not have access to the original documents can follow and understand what the deviation is. Do not replicate the documents in what you turn in.
4. As you may recall from auditing classes at university, it is very important for you to understand the internal controls over the sales process. From the tests of transactions in the sales journal, identify any control deficiencies for this company that might impact your assessment of control risk (we are conducting DUAL tests, i.e. tests of controls and balances for these items). Recommend internal control procedures that could be implemented to address any deficiencies you noted. You can find the definitions of control deficiencies, significant deficiencies and material weaknesses under authoritative standards on the AICPA's web site. In general, how does the assessment of control risk impact the extent of an auditor's substantive tests of transactions? (Include in the memo.)
5. Based on the transactions you select, use the Excel spreadsheet provided to test of the sales account and calculate a proposed audit adjustment. You cannot statistically evaluate your results as you would on an actual audit engagement.
6. Prepare a final memo that contains the items from the audit program:
a. A description in detail of what controls appear to be missing based on the work you conducted. Please provide a numbered list
b. A recommendation of how to fix those controls.
c. A description of how your sample was selected.
d. A detailed description of problems noted and why you do or do not think this supports or does not support the receivable and or revenue balance.
e. A determination of whether revenue is fairly stated.
f. A recommendation of an audit adjustment - Please think carefully about the adjustment. You can only adjust A/R if you know which customer was affected.
g. Make a recommendation on what to do - audit more - ask the client to review transactions, issue an opinion, withdraw from the engagement. Explain why your recommendation is the best option.
7. Step back and determine whether the worksheet by itself has enough evidence to support the conclusion you have in step 6. Remember, your work may be reviewed by a third party.. Make sure you adequately explain the sample selection method, the source, conclusion, etc. This should all be consistent with the evidence documented in the worksheet.
Deliverables:
1. Complete the excel worksheet as required in the audit program.
2. Complete a memo summarizing the tests conducted (on the worksheet).
Attachment:- Assignment Files.rar