Relevant Information for Apollo Shoes Case Week 4 LTA Assignment
Review the Planning section, with emphasis on the Apollo Accounting and Control Procedures Manual and the Apollo Shoe Minutes. Complete the Internal Contr
...
Relevant Information for Apollo Shoes Case Week 4 LTA Assignment
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.
Planning Section
Review Audit Background Minutes: Engagement Letter
Please review the minutes of the meeting and draft an appropriate engagement letter (label it GA-1, for General and Administrative, page 1) addressed to Mr. Lancaster.
Write a brief audit staffing memo (GA-2)
Retrieved from Working Paper Index:
You’ll need to come up with programs for the substantive audit procedures for each of the functional balance sheet areas (indicated with an asterisk (*) below). You can download copies of the audit programs from AuditNet (www.auditnet.org) under “Auditors Sharing Audit Programs” or get them from an old auditing textbook. My preference is to place the audit programs at the beginning of each section. Label the sections as follows:
Retrieved from: Apollo Shoes Minutes
Make notes in the form below for the audit working papers of matters relevant for the audit of the 2007 financial statements. Prepare a working paper (GA-3) for my review with proper headings and these two columns:
Information Relevant to 2007 Audit Audit Action Recommended
You may want to stick a copy of the minutes in the workpapers (GA-3-1, GA-3-2, etc.) behind your memo when you are done with them.
Retrieved from Trial Balance Memo
I want you to put the numbers into three spreadsheets (one for the comparative (i.e., two-year) balance sheet (A-1), one for the comparative income statement (A-2), and one for the comparative statement of cash flows (A-3)). I know that everyone has a particular style of workpaper formatting, but my preference is for the following columns for the income statement and balance sheet:
Acct # Acct
Title W/P
Ref Last year’s (Audited) Current Year
(unaudited) Adjustments Current Year (Audited)
Dr. Cr.
Retrieved from Apollo Analytic Procedures
1. I need you to perform preliminary analytical procedures on the financial statements.
a. Calculate common-size financial statements and dollar amount and percent changes. I suggest you simply make a copy of your spreadsheet from your pro-forma financial statements that I asked you to prepare yesterday and remove the adjustment columns. Have there been any significant changes that we need to examine closer?
b. Calculate financial ratios. Assume the market value of the common stock is $24 million in both the current and prior years. Does anything jump out at you?
c. If you have time, compare Apollo’s numbers with those of its closest competitors, Nike and Reebok. You can get those companies’ numbers from EDGAR (www.sec.gov). I am not sure if industry averages are available, but that too would be helpful.
2. Write a brief memo (GA-4) highlighting what you believe are potential problem areas. Include printouts of your calculations as support (GA-4-1, GA-4-2, etc.)
Retrieved from Materiality Memo
You need to prepare a memo (GA-5) addressing materiality for Apollo Shoes. Remember that the workpapers document that we are following Generally Accepted Auditing Standards. In the memo,
1. Briefly describe independent auditors’ concept of materiality.
2. Describe some common relationships and other considerations used by auditors when assessing the dollar amount considered material. In other words, what are some common measures of materiality with respect to income, sales, and total assets?
3. Based upon your professional judgment and your discussion of items 1 and 2 above, determine an amount you consider to be a minimum material misstatement for Apollo Shoes and justify your recommendation in your memo.
Retrieved from: SAS 99 Memo
We need a memo (GA-6) addressing the potential for fraud for Apollo Shoes. This workpaper is necessary to document that we are following SAS 99 fraud guidance. Some things you might want to include in your memo:
• Have you noticed any “red flags” in either the minutes or your analytic procedures so far?
• Address fraud risk in general terms: types of risk (Remember that improper revenue recognition is always a “red flag.”), significance of risk, likelihood of risk (what is the probability of fraud?), pervasiveness or risk (is fraud risk centralized to one function or individual or is it throughout the organization?)
• How might a fraud might be perpetrated and concealed in the entity
• Suggest ways that we might alter our audit approach to address the potential for fraud, such as assignment of personnel, predictability of auditing procedures, and examination of journal entries and other adjustments
Retrieved from: Apollo Shoes and Computers
Prepare a memo in the General and Administrative section of the current year workpapers (GA series) to document how planning might be affected by the computer processing of accounting transactions. I suggest you consider such things as the extent of computer usage, complexity of computer operations, organization structure of computer activities, availability of data, computer-assisted audit techniques, and need for specialized skills.
End of Planning
Internal Control Section
Retrieved from: Internal Control Revenue and Cash Receipts Cycle
Sales internal control questionnaire
1. Complete the ICQ for Apollo. For “yes” answers, add a comment stating which department and clerk performs the function. For “no” answers, describe the possible “errors” or “frauds” that could occur because of the control weakness.
2. I’ve started a flowchart and listed some strengths and weaknesses, but had to leave before I could finish it. See if you need to add any more strengths and/or weaknesses that you find from the ICQ and narrative descriptions of the revenue cycle.
Refer to Revenue Tests of Controls for Information for other Bride Working Paper as mention in:
Retrieved from: Internal Control Purchasing and Cash Disbursements Cycle
[Show More]
.png)
