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. preparing 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.

Submit a well written audit program for cash. Please prefer to cite any sources using.

Week 1-Assume you are applying for an accounting position at PSC. The controller asks you to prepare the journal entries to record the following transactions for retail store operations of PSC. Assume a perpetual inventory system.

April 2

Purchased merchandise from Johns Company under the following terms: $5,900 price, invoice dated

April 2

Explaincredit terms of 2/15/, n/60, and FOB shipping point in a sentence or two.

April 3

Paid $330 for shipping charges on April 2 purchases.

April 4

Returned to Johns Company unacceptable merchandise that had an invoice price of $900.

April 17

Sent a check to Johns Company for the April 2 purchase, net of the discount and the returned merchandise.

April 18

Purchased merchandise from William Corp. under the following terms: $12,250 price, invoice dated April 18, credit terms of 2/10, n/30, and FOB destination.

April 21

After negotiations, received from William Corp. a $3,250 allowance on April 18 purchase.

April 28

Sent check to William paying for the April 18 purchase, net of the discount and allowance.

Submit your April journal entries for Week 1 .

Components of cash audit program:

a) Audit of internal controls persistent to cash receipts transactions

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

c) The 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 ensure 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 company financial statement.

Accounts receivable is one of the largest assets 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 the 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 receivable report total: the auditor will add up the invoices on the accounts receivable aging reports to verify that the total in the general ledger is correct

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

D) testing of invoices listed in the receivable report: the auditors will select some invoices from the accounts receivable aging 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 shipment 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 the firm follows to desire on an allowance for doubtful accounts

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

J) Related party receivable is received for collectability as well as whether they instead of as wages or dividends and whether they are properly authorized.

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