5 . Write professional memo to the engagement partner Anna Garcia summarizing your findings to

questions 2 3 and 4 . The memo should be I page or less single - spaced

a . Identify the areas of the audit that need improvements

D . Provide feedback on ways to improve their audit of the cash account

C . Use constructive criticism . Remember that the purpose of Garcia and Foster's internal

Q.3

1. Did they perform all of the steps associated with the audit program?

• The auditor failed to perform parts A4 and A5 of the C.2 audit procedure. There is no signature or date on the completed audit procedure and no evidence was gathered.
• The auditor signed off that they completed part C4 of the C.2 (C2.10 and C2.11) audit procedure; however, upon inspection of the supporting documents there is no evidence gathered regarding the assertion. The October and November cash operating account reconciliations are present, but no details regarding Lindsay McKenna investigating irreconcilable differences is present in the documents. Neither the auditors evidence or Alpine Cupcakes documents support the presence of any investigations.

1. Did they perform the steps accurately? If not, describe the problem and follow up on it to the extent possible with the information given.

Page Number

Issue Identified

C.2.1

• Based on the evidence gathered by the surprise check on February 5, the following conclusion stating that Diana inputs entries daily appears to be incorrect. It directly contradicts the evidence gathered.
• The selection of December cash disbursements was done by selecting the largest transactions. This should have been done randomly to properly evaluate regular business transactions.
• The auditor performed the suprise check on 2/5/20X3, but signed off that the surprise check was completed on 2/4/20X3 in the audit procedures.

C.2.2

• Miguel Lopez signed off on the monthly control listing on 11/27/20X2, which is 27 days after the month ends. The signing was required to be done by the 2nd day of the following month.

C.2.3

• Miguel Lopez signed off on the monthly control listing on 1/6/20X3, which is 6 days after the month ends. The signing was required to be done by the 2nd day of the following month.
• From December 1st till December 20th the journal entries were being placed by someone other than Diana Hayes.
• The patterns of the transactions require a deeper investigation due to the lack of transactions from 12/1/20X2 to 12/20/20X2.
• The amount of Storefront cash receipts for December is the same amount as that of October, $30,000. During the standard course of business operation having identical storefront sales is statistically unlikely. This number is also perfectly rounded, without any reasoning from Alpine Cupcakes, which should have drawn more attention.

C.2

• Miguel Lopez is supposed to cancel supporting documents with a PAID stamp, the date of payments, and the signature of the person signing the check. For C2.4, 2.7, and 2.8 the only name under the PAID stamp is Miguel Lopez when there is a co-signer on the check. Checks that require a co-signature should have both names under the stamp.
• The following issues regarding documents C.2.4 to C.2.9 highlight instances when the proper processes are not followed by Alpines employees. The assertions made by the auditor in C.2.1 are disproven by the issues in these documents.

C.2.5

• Alexis Madison signed this document when the amount was under $5,000. She is not required to cosign this check.
• There is no PAID stamp for this document

C.2.6

• Diana Hayes signed this document when Miguel Lopez signs any check under $5,000.
• Although the check was signed off by Diana Hayes but still the PAID stamp and signature was done by Miguel Lopez.
• The voucher packet lacks a purchase order and receiving report.

C.2.7

• Alexis Madison signed this document when the amount was under $5,000. She is not required to cosign this check.
• The voucher packet lacks a receiving report. There is no note or documentation by Alpines Cupcakes regarding an expected arrival. There is a PAID stamp which should not be included without proper summary of the location of the products.

C.2.8

• The amount was greater than $5,000, which means it required Alexis Madison's co-signature; however, Diana Hayes was the one who co-signed.

C.2.9

• The check was only signed by Miguel Lopez while according to the procedure any check over $5,000 is also co-signed by Alex Madison.
• The voucher packet only has proof of the check, there is no purchase order, vendor invoice, or receiving report; even though this transaction was internal, for Payroll, there should still be some sort of supporting evidence such as the employees getting paid and the hours worked.
• Miguel Lopez cancel the document with PAID stamp on the date of payment which should have been 12/28/20X2 as on the check but, it was cancelled on 12/30/20X2

C.2.10

• Bank reconciliation for October was not performed within 5 days of month end, instead it was performed on 11/06/20X2.

C.2.11

• Bank reconciliation for November was not performed within 5 days of month end, instead it was performed on 12/21/20X2.
• Account reconciliation is to be done by Lindsay McKenna, but for November's it was prepared by Diana Hayes.
• Bank reconciliation is to be reviewed by Miguel Lopez within 10 days of the month end; however, he reviewed the reconciliations for November on 12/21/20X2

1. Do you see any other issues or problems with the auditors' work or client documentation?

The multitude of errors stated in part B demonstrate breakdowns in internal controls. There are continuous instances of different individuals signing off on documents they are not supposed to have access to and other necessary procedures, such as including a complete voucher packet with checks, are not performed. The auditor should have noticed and noted these breakdowns when making their assertions. The many assertions made in C.2.1 should properly reflect these discovered breakdowns. Based on our evaluation, the final conclusion made on page C.2.1 seems to be inaccurate given the failure to fully complete the audit procedures specified in part A and the issues presented in part B.

Q.4

1. Did they perform all of the steps associated with the audit program?

• The auditor failed to perform parts A4 and A5 of the C.2 audit procedure. There is no signature or date on the completed audit procedure and no evidence was gathered.
• The auditor signed off that they completed part C4 of the C.2 (C2.10 and C2.11) audit procedure; however, upon inspection of the supporting documents there is no evidence gathered regarding the assertion. The October and November cash operating account reconciliations are present, but no details regarding Lindsay McKenna investigating irreconcilable differences is present in the documents. Neither the auditors evidence or Alpine Cupcakes documents support the presence of any investigations.

1. Did they perform the steps accurately? If not, describe the problem and follow up on it to the extent possible with the information given.

Page Number

Issue Identified

C.2.1

• Based on the evidence gathered by the surprise check on February 5, the following conclusion stating that Diana inputs entries daily appears to be incorrect. It directly contradicts the evidence gathered.
• The selection of December cash disbursements was done by selecting the largest transactions. This should have been done randomly to properly evaluate regular business transactions.
• The auditor performed the suprise check on 2/5/20X3, but signed off that the surprise check was completed on 2/4/20X3 in the audit procedures.

C.2.2

• Miguel Lopez signed off on the monthly control listing on 11/27/20X2, which is 27 days after the month ends. The signing was required to be done by the 2nd day of the following month.

C.2.3

• Miguel Lopez signed off on the monthly control listing on 1/6/20X3, which is 6 days after the month ends. The signing was required to be done by the 2nd day of the following month.
• From December 1st till December 20th the journal entries were being placed by someone other than Diana Hayes.
• The patterns of the transactions require a deeper investigation due to the lack of transactions from 12/1/20X2 to 12/20/20X2.
• The amount of Storefront cash receipts for December is the same amount as that of October, $30,000. During the standard course of business operation having identical storefront sales is statistically unlikely. This number is also perfectly rounded, without any reasoning from Alpine Cupcakes, which should have drawn more attention.

C.2

• Miguel Lopez is supposed to cancel supporting documents with a PAID stamp, the date of payments, and the signature of the person signing the check. For C2.4, 2.7, and 2.8 the only name under the PAID stamp is Miguel Lopez when there is a co-signer on the check. Checks that require a co-signature should have both names under the stamp.
• The following issues regarding documents C.2.4 to C.2.9 highlight instances when the proper processes are not followed by Alpines employees. The assertions made by the auditor in C.2.1 are disproven by the issues in these documents.

C.2.5

• Alexis Madison signed this document when the amount was under $5,000. She is not required to cosign this check.
• There is no PAID stamp for this document

C.2.6

• Diana Hayes signed this document when Miguel Lopez signs any check under $5,000.
• Although the check was signed off by Diana Hayes but still the PAID stamp and signature was done by Miguel Lopez.
• The voucher packet lacks a purchase order and receiving report.

C.2.7

• Alexis Madison signed this document when the amount was under $5,000. She is not required to cosign this check.
• The voucher packet lacks a receiving report. There is no note or documentation by Alpines Cupcakes regarding an expected arrival. There is a PAID stamp which should not be included without proper summary of the location of the products.

C.2.8

• The amount was greater than $5,000, which means it required Alexis Madison's co-signature; however, Diana Hayes was the one who co-signed.

C.2.9

• The check was only signed by Miguel Lopez while according to the procedure any check over $5,000 is also co-signed by Alex Madison.
• The voucher packet only has proof of the check, there is no purchase order, vendor invoice, or receiving report; even though this transaction was internal, for Payroll, there should still be some sort of supporting evidence such as the employees getting paid and the hours worked.
• Miguel Lopez cancel the document with PAID stamp on the date of payment which should have been 12/28/20X2 as on the check but, it was cancelled on 12/30/20X2

C.2.10

• Bank reconciliation for October was not performed within 5 days of month end, instead it was performed on 11/06/20X2.

C.2.11

• Bank reconciliation for November was not performed within 5 days of month end, instead it was performed on 12/21/20X2.
• Account reconciliation is to be done by Lindsay McKenna, but for November's it was prepared by Diana Hayes.
• Bank reconciliation is to be reviewed by Miguel Lopez within 10 days of the month end; however, he reviewed the reconciliations for November on 12/21/20X2

1. Do you see any other issues or problems with the auditors' work or client documentation?

The multitude of errors stated in part B demonstrate breakdowns in internal controls. There are continuous instances of different individuals signing off on documents they are not supposed to have access to and other necessary procedures, such as including a complete voucher packet with checks, are not performed. The auditor should have noticed and noted these breakdowns when making their assertions. The many assertions made in C.2.1 should properly reflect these discovered breakdowns. Based on our evaluation, the final conclusion made on page C.2.1 seems to be inaccurate given the failure to fully complete the audit procedures specified in part A and the issues presented in part B.