Audit Program Design Part Ii Essay

919 Words Feb 13th, 2011 4 Pages
Audit Program Design Part II
January 31, 2011

At Anderson, Olds, and Watershed, we have developed the following test of controls, substantive test of transactions, and analytical procedures for the audit of the sales and collection cycle, the payroll and personnel cycle, and the acquisition and payment cycle of Apollo Shoe Company. The tests are consistent with generally accepted auditing methods in The United States of America. The tests will be designed to prove existence, completeness, and accuracy. Please take the time to look over the proposed tests and techniques and feel free to ask any questions regarding the tests that will be performed.
Sales and Collection Cycle
To test for existence, AOW will verify whether
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The testing procedures remain consistent between cycles. To test for completeness in the payroll and personnel cycle, we must check that payroll checks are numbered and accounted for and that bank accounts are independently reconciled. Also we must reconcile the disbursements in the payroll journal with the disbursements on the payroll bank statements. To test for accuracy, we must verify that calculations and amounts are internally verified by checking for initials of authorized individuals. We could also recompute timecards and gross pay. To test for timing, we compare the date of the recorded check in the payroll journal with the date on the canceled check and the timecard. To check for posting and summarization, the payroll master file totals re compared with general ledger totals. We must examine the initialed summary total reports indicating that comparisons have been made. Analytical Procedures for Payroll and Personnel Cycles
The purpose of the analytical procedures is to compare and contrast the methods used to ensure proper internal controls are in use for the payroll and personnel cycles. The following examples are designed to aid in reconciliation Compare payroll expense account balance to previous years (adjusted for pay rate increases and increases in volume.
• Compare direct labor as a percentage of sales with previous years.
• Compare payroll tax expense as a percentage of salaries and wages with previous years

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