COSTCO’s Internal Audit
To: Management
From: Audit Committee
Date: December 6, 2015
Subject: Internal Audit
The purpose of the internal audit is to protect Costco's assets through evaluating the acceptability and efficiency of internal controls; recognizing areas of possible risk, revenue improvement and/or cost reductions; and making sure transactions are authorized, completed, and logged as proposed.
Costco normally knows sales, net of probable returns and at the period the member takes ownership of the products. The amount received is normally logged as deferred revenue on the consolidated balance sheets pending the sales or serviced is finished. Costco provides for projected sales returns based on past transaction. Membership fees …show more content…
It helps managements achieves its objectives by reasonable ensuring the integrity of financial information, effectiveness and efficiency of operations and compliance with laws and regulations. The most critical controls related to inventory audit are segregation of duties, periodic reconciliation of inventory, physical access to inventory, and access to accounting systems. The controls helps to limit the opportunities to misuse inventory leading to fraud risk reduction. Periodic reconciliation of inventory will help identify any errors, mistakes or fraud caused by employees. Costco should consider proper security control to prevent cover-up of inventory, which can be done through securing locked gates, surveillance cameras, and security guards. Also management must ensure appropriate access to accounting system to prevent unauthorized changes to system and …show more content…
The role of the management is to keep proper books of accounts and financial statements. The outcomes from the audit report that was done on the past few months have raised some concerns in the organization. We have audited the financial statements which involves statement of financial position of the year ended December 19th 2014. We have taken large samples of transactions of every class with the aim to determine its occurrence, accuracy, completeness and cut off. The simple random sampling and systematic sampling methods were used when analyzing all transactions. Due to the large volume of cash the Costco holds at its locations, cash and its correspondence are considered a high risk. Costco should have its own systems auditor and an independent audit department to review all the financial transaction every 3 months with each of its locations. This is designed at making sure that Costco will prepare financial statements that meet international accounting
To: Management
From: Audit Committee
Date: December 6, 2015
Subject: Internal Audit
The purpose of the internal audit is to protect Costco's assets through evaluating the acceptability and efficiency of internal controls; recognizing areas of possible risk, revenue improvement and/or cost reductions; and making sure transactions are authorized, completed, and logged as proposed.
Costco normally knows sales, net of probable returns and at the period the member takes ownership of the products. The amount received is normally logged as deferred revenue on the consolidated balance sheets pending the sales or serviced is finished. Costco provides for projected sales returns based on past transaction. Membership fees …show more content…
It helps managements achieves its objectives by reasonable ensuring the integrity of financial information, effectiveness and efficiency of operations and compliance with laws and regulations. The most critical controls related to inventory audit are segregation of duties, periodic reconciliation of inventory, physical access to inventory, and access to accounting systems. The controls helps to limit the opportunities to misuse inventory leading to fraud risk reduction. Periodic reconciliation of inventory will help identify any errors, mistakes or fraud caused by employees. Costco should consider proper security control to prevent cover-up of inventory, which can be done through securing locked gates, surveillance cameras, and security guards. Also management must ensure appropriate access to accounting system to prevent unauthorized changes to system and …show more content…
The role of the management is to keep proper books of accounts and financial statements. The outcomes from the audit report that was done on the past few months have raised some concerns in the organization. We have audited the financial statements which involves statement of financial position of the year ended December 19th 2014. We have taken large samples of transactions of every class with the aim to determine its occurrence, accuracy, completeness and cut off. The simple random sampling and systematic sampling methods were used when analyzing all transactions. Due to the large volume of cash the Costco holds at its locations, cash and its correspondence are considered a high risk. Costco should have its own systems auditor and an independent audit department to review all the financial transaction every 3 months with each of its locations. This is designed at making sure that Costco will prepare financial statements that meet international accounting