Using cash workpapers given (cash lead schedule, cash confirmation, cutoff bank statement, etc.) prepare working papers for the audit of cash balances. See PDF attachment for two more other questions.

We received a number of account receivable (and one pre-paid insurance) confirmations that I put on your desk when I stopped by to talk to Samuel Carboy this morning. With the good response rate on the positive confirmations, you can probably start working on A/R now. While I think of it, you need to prepare a memo (C-2-1) addressing the following issues: 1. Describe the two forms of accounts receivable confirmation requests that you used and indicate the factors that you considered in determining which type to use. 2. What \"alternative procedures\" are you going to use to verify the existence of these accounts and the gross value of the receivables if the customers who receive positive confirmations never reply, even to a second request? Put the confirmations in the workpapers (C-2-2, C-2-3, C-2-4, etc.). Address any discrepancies between the client and the customer and propose adjustments as necessary. It would also be helpful to indicate the payments received by Apollo on the Aged Trial Balance Schedule (C-2). You can get these off of any early January deposits slips. If you get copies from the client, be sure to tie the totals into deposits indicated on the cutoff bank statement received directly from the bank. Lastly, the allowance for doubtful accounts looks pretty low. A/R goes up, but the allowance goes down? I need a separate workpaper (C-3) addressing the reasonableness of Apollo's Allowance for Doubtful Accounts. You can specifically identify troubled accounts, look at subsequent cash collections, look at what Apollo's competitors do, look at what Apollo has done in the past (bad debt expense as a % of sales, allowance for doubtful accounts as a % of total receivables) to develop your estimate of what should be in the allowance. Also consider current and previous A/R Turnover and Days' Sales in A/R ratios. Apollo Shoe Case This paper will discuss the internal controls and auditing of Apollo Shoes Inc.. Apollo Shoes Inc. is lead by Larry Lancaster, CEO, President, and chairman of the Apollo Shoes board of directors. Apollo Shoes growth has been extraordinary the past few years but the company has failed to address their financials by not auditing their net income for the past year. This paper will address the company's sales transaction processing, strengths and weaknesses, and the revenue cycle. ICQ for Apollo Internal Control QuestionnaireSales Transaction Processing Assertions and Questions Yes, No, N/A Comments Occurrence assertion: 1. Is the credit department independent of the sales department? Yes - Credit manager in Treasurer's Department 2. Are sales of the following types controlled by the same procedures described below? Sales to employees, COD sales, disposals of property, cash sales, and scrap sales. N/A - Not enough information found 3. Yes Is access to sales invoice blanks restricted? Kept in locked closet and remove only for billing clerk use 4. Are pre-numbered bills of lading or other shipping documents prepared or completed in the shipping department? Yes These document are prepared or completed in this department (Shipping Department) Completeness assertion: 5. Yes Sales invoice blanks are pre-numbered 6. Yes Are sales invoice blanks pre-numbered? Is the sequence checked for missing invoices? When sales invoices are recorded, the numerical sequence shall be checked by an accounts receivable clerk, and missing invoices must be located and explained. 7. Is the shipping document numerical sequence checked for missing bills of lading numbers? N/A Not enough information Accuracy assertion: 8. Yes Are all credit sales approved by the credit department prior to shipment? Credit manager checks the customers' accounts receivable balances and other credit file information using a computer-based inquiry system before making a decision. 9. Yes Are sales prices and terms based on approved standards? An approved price list is used 10. Are returned sales credits and other credits supported by documentation as to receipt, condition, and quantity, and approved by a responsible officer? Yes The treasurer shall approve all cash refunds and allowance credit memos for sales returns, after initiation by customer relations personnel. 11. Yes Are shipped quantities compared to invoice quantities? The items shipped shall be compared to the items billed for proper quantity (Shipping Department) 12. Are sales invoices checked for error in quantities, prices, extensions and footing, and freight allowances, and checked with customers' orders? Yes The items shipped shall be compared to the items billed for proper quantity, price, and other sales order terms. 13. Is there an overall check on arithmetic accuracy of period sales data by a statistical or product-line analysis? Yes The marketing vice president shall periodically analyze sales activity by product lines in comparison to budgets and forecasts and prior years' activity. 14. Are periodic sales data reported directly to general ledger accounting independent of accounts receivable accounting? No Prepared by the accounts receivable department Classification objective: 15. Yes Does the accounting manual contain instructions for classifying sales? Sales credits are coded to three product line sales revenue accounts. Cutoff objective: 16. Does the accounting manual contain instructions to date sales invoices on the shipment date? Yes Sales invoice batches shall be dated with the date of shipment Strengths and Weaknesses 1. Sales order documents are not prenumbered, and are kept in busy sales' clerks' area. 2. Customer order is attached if written one was received 3. Sales invoices are prenumbered, kept in locker, and removed only for billing clerk use. 4. Periodic sales data reported directly to general ledger accounting not independent of accounts receivable accounting. 5. No information of checked for missing bills of lading numbers. 6. Not enough information on how different types of sales are controlled. 7. Arithmetic accuracy of period sales data is checked by a statistical or product-line analysis. Bridge Working Paper Addressing the Revenue Cycle Index No. Control Activity Describe the audit implications of the strengths/ weaknesses related to the control activities Describe specifically how you would test the control. W1 Compensating audit procedures. Requisition Authorization Only single level of authorization at department level for all values of procurement, no authorization matrix in place Observation Check past purchase orders for authorization levels S1 Company's Procurement department is centralized Centralized procurement department helps in implementing and monitoring the effectiveness of controls Observation S2 N.A. Approved Vendor list Approved vendor list minimizes risk of phantom vendors Inquiry & ObservationVendor review process & procedure for updating approved vendor list to be checked W2 Procurement catalogue Manual process, no electronic procurement process in place Inquiry & Observation All vouchers, PO, RR and other documents to be reviewed and tallied against invoices and outgoing payments W3 Stock levels Procurement does not check with warehouse for existing inventory leading to a risk of wasteful purchase order Observation inventory levels cross checks recent purchases against S3 Payment Robust controls in place with VP - Finance authorising payments Inquiry & ObservationPast records to be checked to ensure process is followed. W4 Vendor due diligence Vendor audit, product quality audits not performed Inquirycheck with departments on quality of recent procurements