Old Main Manufacturing Memo

The purpose of this memorandum is to provide an account of my labor and considerations in regards to the audit of the Sales Discount Account of Old Main Manufacturing (OMM). I’ve prepared a draft of an audit program that outlines the steps that I have taken to complete the audit successfully. As a part of the program, I traced the cash receipts journal to the sales journal in order to determine the completeness and accuracy of the credit to accounts receivable and recording of the sales discount. I was able to determine that three of 63 sample invoices of OMM required further review. After reviewing the invoices, I verified that the customers paid the amount of the invoice minus the discount taken within the ten-day discount period. My findings indicate that the three misstatements occurred when OMM failed to credit the account receivable for the full amount of the invoice and record the sales discount.
As a part of the audit, I was concerned with the completeness, accuracy, and cutoff …show more content…
Furthermore, I would need to obtain an understanding of the nature and cause of the misstatements (i.e. differences in application or principle, error or fraud, misunderstanding or carelessness, etc.) and possible relationship of the misstatements to other phases of the audit. Based upon my testing, I am confident that the sales discount is fairly stated. I feel that the 63 invoices are a fair representation of the population over the course of a fiscal year and the misstatements appear to be a result of error. The amount of misstatement was immaterial in relation to the allotted amount in W/P 2-1. If I believed that the sales discount account wasn’t fairly stated, I would obtain more evidence through inspection of bank statements before soliciting a meeting with you to discuss my