Inventory and Warehousing Cycle The audit of the inventory and warehousing cycle is designed to test inventory counts, processes, and operations. The programs of transactions on this cycle embody product sales, value of inventory, value of merchandise provided, product sales returns and allowances, and estimates of allowance for gradual shifting inventory. Exams of Controls and Substantive Exams of TransactionsTable WK6-1 exhibits the interrelationships of the transaction related to audit targets, exams of controls, and substantive exams of transactions that should be permitted all through the audit technique of Apollo Sneakers, Inc. Desk WK6-1. Inventory Warehousing Cycle Exams of Controls and Substantive Exams of Transactions Audit Design (Arens, Elder, & Beasley, 2006) Inventory – Apollo Sneakers, Inc.Transaction-Related Audit Goals – Exams of Controls – Substantive Exams of Transactions| Transaction-Related Audit Aim| Exams of Controls| Substantive Exams of Transactions| Inventory as recorded on tags exists (existence).
| * Select a random sample of tag numbers and decide the tag with that amount hooked as much as the exact inventory. | * Observe whether or not or not movement of inventory takes place all through the rely. | Present inventory is counted and tagged, and tags are accounted for to confirm none are missing (completeness). * Research inventory to confirm it is tagged. | * Observe whether or not or not movement of inventory takes place all through the rely. * Inquire as to inventory somewhere else. | Inventory is counted exactly (accuracy).
| * Recount shopper’s counts to confirm the recorded counts are appropriate on the tags (moreover look at descriptions and unit of rely, paying homage to dozen or gross). * Consider bodily counts with perpetual inventory grasp file. | * Doc shopper’s counts for subsequent testing. Inventory is assessed precisely on the tags (classification). |* Research inventory descriptions on the tags and look at with the exact inventory for raw supplies, work-in-process, and accomplished objects. | * Take into account whether or not or not the p.c of completion recorded on the tags for work-in-process is affordable. | Information is obtained to confirm product sales and inventory purchases are recorded throughout the appropriate interval (cutoff).
| * Doc throughout the audit recordsdata for subsequent follow-up the ultimate receiving report amount used at year-end. * Make it possible for the inventory for the above merchandise was included throughout the bodily rely. | The patron has rights to inventory recorded on tags (rights). | * Inquire about consignment or purchaser inventory included on shopper’s premises. | * Be alert for inventory that is put apart or particularly marked as indications of non-ownership. | Analytical Procedures Analytical procedures is perhaps carried out a lot of events all through an engagement: * Throughout the planning part to assist in determining the character, extent, and timing of labor to be carried out. In the midst of the testing part of the audit along side the audit procedures, and * In the midst of the completion part of the audit as a remaining overview for supplies misstatements for financial points and to help the auditor take a remaining “aim look” on the financial statements which have been audited (Arens, Elder, & Beasley, 2006, p.
208). Arens, Elder, and Beasley (2006) make clear that one of many important important analytical procedures for uncovering misstatements of the Inventory and Warehousing Cycle are evaluating current with prior yr.Analytical procedures for the steadiness sheet and income assertion accounts throughout the Inventory and Warehousing Cycle are launched in Desk WK6-2. Desk WK6-2. Inventory and Warehousing Cycle Analytical Procedures (Arens, Elder & Beasley, 2006) Cash Cycle The subsequent exams of controls and substantive exams of transactions for the Cash Cycle talked about by Arens, Elder, and Beasley (2006) are designed to ensure existence, completeness, accuracy, classification, timing, and summarization.Desk WK6-Three illustrates the design of test of controls and substantive exams of Cash Cycle. Exams of Controls and Substantive Exams of Transactions Cash – Apollo Sneakers, Inc.
Transaction-Related Audit Goals – Exams of Controls – Substantive Exams of Transactions| Transaction-Related Audit Aim| Exams of Controls| Substantive Exams of Transactions| Cash throughout the monetary establishment as acknowledged on the reconciliation exists (existence)| * Receipt and exams of a monetary establishment affirmation. | * Proof account exists and balances are appropriate. Present cash throughout the monetary establishment is recorded (completeness). | * Receipt and exams of a cutoff monetary establishment assertion. | * Exams of the monetary establishment reconciliation| Cash throughout the monetary establishment as acknowledged on the reconciliation is appropriate (accuracy). | * Exams of the monetary establishment reconciliation. * Extended exams of the monetary establishment reconciliation.
| * Exams for kiting. * Proof of cash. | Cash throughout the monetary establishment is accurately launched and disclosed (presentation and disclosure). |* Research minutes, mortgage agreements, and purchase affirmation for restrictions on the utilization of cash and compensating balances. * Consider financial statements to confirm (a) supplies monetary financial savings accounts and certificates of deposit are disclosed individually from cash throughout the monetary establishment,(b) cash restricted to certain makes use of and compensating balances are adequately disclosed, and (c) monetary establishment overdrafts are included as current liabilities. | Cash receipts and cash disbursements transactions are recorded throughout the appropriate interval (cutoff). | * Cash receipts:Rely the cash available on the ultimate day of the yr and subsequently trace to deposits in transit and the cash receipts journal.
Cash disbursements:Doc the ultimate look at amount used on the ultimate day of the yr and subsequently trace to the superb checks and the cash disbursements journal| * Trace deposits in transit to subsequent interval monetary establishment assertion (cutoff monetary establishment assertion). * Trace wonderful checks to subsequent interval monetary establishment assertion. | Desk WK6-Three. Cash Cycle Exams of Controls and Substantive Exams of Transactions Audit Design (Arens, Elder, & Beasley, 2006) Analytical Procedures Analytical procedures for the steadiness sheet and income assertion accounts throughout the Cash Cycle are launched in Desk WK6-4.Desk WK6-4 Cash Cycle Analytical Procedures (Arens, Elder, & Beasley, 2006) References Arens, A. A. , Elder, R.
J. , & Beasley, M. S. (2006). Auditing and assurance suppliers: an built-in technique (11th ed. ). Larger Saddle River, NJ: Pearson.
Louwers, T. J. , & Reynolds, J. Okay. (2007). Apollo sneakers, inc. : An audit case to accompany auditing and assurance suppliers.
[University of Phoenix Custom Edition e-Text]. New York, NY: McGraw-Hill/Irwin. Retrieved from Faculty of Phoenix, ACC546 – Auditing site.