Now that you have gathered all information for Part $1$ and have accepted A&E as your client, let's move

to Part $2-$ Internal Controls $($Chapters $6$ & $7).$ Note$-$Part $2$ includes documentation created in Part $1.$

As the junior auditor, you have been asked to gather information regarding the different internal

processes.

When a new client engages the company to perform a landscape job, Ana or Emma will complete a

contract outlining the details of the work to be performed, timing and price. The contract is sent to the

customer to be signed priar to the start of the job. All clients are required to pay a $20\%$ seposit before the

jab will be initiated. Once the job is $50\%$ complete, the company will issue a Progress Billing Report. This

will indicate to the company the status of the work performed and detail what is left to be accomplished.

The customer is required to sign aff their agreement with the progress. Once the report is signed, Lauren

will create an invoice to be sent to the client charging $50\%$ of the contract price. At the completion of the

jab, another Progress Billing Report is signed by the client indicating they are satisfied with the work. Once

signed, Lauren will send the final invoice. Payment terms are due on receipt of invoice. The company does

nat perform any credit checks on clients or identify credit limits$.$ Every week, Ana and Emma review the

Sales Journal for the week to ensure that the invoices issued are correct. They each sign off on the listing.

Snawplow services are affered from the period November $1-$ March $31.$ All contracts are for the entire

five $(5)$ month periad. Ana generates all the contracts in October which are mailed or emailed to

customers for signature. Contracts can be paid on a monthly basis or upfront for a $5\%$ discount, if paid by

November $1^t,$ Lauren keeps an excel file which lists the contracts. If the customer has indicated they will

pay upfront, she will issue an inwoice and enter it into the accounting system as unearned revenue. Each

manth she will recagnize one$-$fifth $($:$\frac{1}{5}$:$)$ of the revenue by making a journal entry to move it from

unearned revenue into revenue. For clients that pay monthly, Lauren issues an irvoice at the beginning

of each month.

Credit memos are rarely issued, however, if necessary, only Ana or Emma can issue one.

Clients pay their imvoices via cheques. Lauren is the in$-$house bookkeper wha works on Mandays,

Wednestays and Fridays. On the days she is in the office she will open the mail and set aside any cheques

that have come in$.$ On days she is not in the office, Emma will open the mail and set the cheques aside for

Lauren to deal with on her next day in$.$ Lauren will fill out the deposit book each day and leave it for Emma

to go to the bank to make the deposit. As Lauren fills out the deposit book, she will also enter into the

accounting system the receipt of payment.

When inwaices to be paid are received, either via email or in the mail, they are given to Emma for appraval

to pay. Lauren will then enter them into the accounting saftware. Every Friday, Ana will go through the

payables listing and print cheques for supplier invoices. The cheques are kept in Ana's office, in her

unlocked filing cabinet drawer. All cheques issued must have $1$ autharized signature $-$ either Emma or Ana.

When the cheques are signed, Ana will sign the ariginal invoice indicating it has been paid and pass both

the cheques and the invoices to Lauren who will send them out to the vendors and updates the accounting

records appropriately.

Bank reconciliatians are performed on a monthly basis by Lauren. Emma will review the year end bank

reconciliation in anticipation of the year end audit.

The compary keeps an inventory of grawel, stone and interlock bricks as these are common materials

needed in their jobs. Sometimes there are delays in receiving these items from suppliers, so the company

decided to keep a stock on hand to avoid unnecessary delays on their jobs. Manuel is the foreman in

charge of monitaring the status of all landscape jobs. Part of his job includes manitoring inventory levels.

When he sees there is a need to place an order, he will create a PO in the system and send it to the

vendors. When the shipment is received, Lauren will create a receiving report. Manuel will agree the

receiving report to the original PO and sign off to indicate that the correct goods were received. When

the invoice is received from the vendor, Lauren will match it to the original PO$.$ She will initial the invoice

to indicate that it matches the goods$/$quantity$/$price per the original PO$.$ At the end of each quarter,

Manuel will perform an imentory count.

All full$-$time employees are on a salary, part$-$time emplayees are paid hourly. Pay cheques are issued every

Friday for the previaus week's work. The company uses