Question

II. Class Project:

Assume you are the senior accountant on an audit engagement of a fictitious business, Pine Street Company (PSC). Assume the instructor is the engagement partner. You are to prepare an audit program for PSC. The firm manufactures and sells bicycles. The audit program must be in one of the following areas of the business: accounts receivable and revenues; inventories and costs of goods sold; accounts payable; payroll; or property, plant and equipment.

  Week 2 - Identify the components/sections of a cash audit program for PSC. Go to www.bing.com (Links to an external site.)Links to an external site. or www.google.com (Links to an external site.)Links to an external site. to view examples of audit programs. Submit your response.

Submit your response. Contact the instructor as needed for assistance.  

Answer 1

Components of cash audit programme :-

a) Audit of internal controls persistent to cash receipts transactions

b) Tests to detect lapping :- Lapping is misappropriation of cash receipts and one of the most common means by which an employee can from an organisation

c) Analytical procedure helps the auditor note any obvious discrepancies or errors before getting performing tests of audits

d) Test of details :- Test of details of transactions and test of balances are being carried out by the auditor to ansure the relevant cash is included in the balance

e) Auditor may provide other types of services other may reasonable assurance of the auditing of a companies financial statements.

Accounts receivable is one of the largest asset that a company far, therefore auditor tends to spend a considerate amount of time gaining assurance that the amount of asset is reasonable and correct

Here are some of the audit procedures that may be followed :-

A) Trace receivable report to general ledger :- The auditor will ask for a periodical report from which they trace the grand total to the amount in the accounts receivable account in the general ledger

B) calculate receiveble report total :- the auditor will add up the invoices on the accounts receivable ageing reports to verify that the total in the general ledger is correct

C) investigate rewriting items :- the auditor will likely to want review the justification for longer amounts through documents and other reliable sources

D) testing of invoice listed in receivable report :- the auditors will selected some invoices from the accounts receivable ageing report and compare them to supporting documents to check if they were the correct amounts, to the correct customers and on the correct dates.

E) matching invoices to shipping reg :- the auditor will match invoices dates to the shippment dates for those items in the shipping leg,to sales are being supported accordingly

F) Confirmation from customers :- Contact your customers directly and asking them to confirm the accounts receivable unpaid as on the end of the supporting period they are auditing

G) Review cash receipts if auditors are unable to confirm accounts receivable through bank accounts

H) Assessment of allowance for doubtful accounts through the process that firm follow to desire on allowance for doubtful accounts

I) Assessment of bad debts written of through comparison of proposing bad debts to sales of current year in comparison to prior years to check the reasonableness.

J) Related party receivable are received for collectability as well as whether they insted of as wages or diviudends and whether they are properly aurhorized.

K) Trend analysis :- Review trend line of sales and accounts receivable comparison of receivables to current assets , average collection period