Adult Program Design Part II Essay Example | Topics and Well Written Essays - 1000 words

Adult Program Design Part II - Essay Example But the systems in every business also need to be audited in terms of their suitability and credibility. Before a business can be audited, it is wise to construct an audit design that will aid in the process of audit and not only look at the existing flow of transactions and their recording and reporting on financial statements and other records, but also recommend improvements and needed changes that will serve in terms of clarity, veracity and meet the laws and principles of the land. In this assignment we are going to design tests of controls, substantive tests of transactions, and analytical procedures for the acquisition and payment of the business called Apollo Shoes. The Acquisitions and Payments Process at Apollo Shoes It Is evident that we can only design an audit procedure or process around the existing flow of transactions and their processes at Apollo Shoes. Only in the case of massive fraud or circumstances warranting a detailed investigation would the complete revamping of existing procedures be understandable. According to the present Accounting and Control Procedure Manual as indicated in the Case Study details, all cash disbursements /payments are made by check, signed by the Treasurer, including those for petty cash transactions. Checks are always made out to a defined payee, never to cash. Blank checks remain in the custody of the Accounts Payable Department and the treasurer is not allowed to sign blank checks. Additionally, we see that checks are recorded in the cash disbursements journal using the date of the check, and in the general journal using the month of the check as a factor for recording these entries. Internal Control Procedures While it appears from the case study material especially the accounting and control procedure manual that some degree of internal control has been maintained over cash disbursements/ payments process, there are a few comments to be made. One factor is the separation of ownership and control. Since the tre asurer himself signs most of the checks, he can very well make them out to a fictitious vendor and then pocket the money himself after opening up an account in that name. The case of Comptronix as reported in Chapter 19 of the text indicates that collusion between unscrupulous individuals even in top management is not unheard of (Arens et al., 2006). Enron is another case in point. Secondly, the recording of transactions as per date made out on the check leaves some room for error and can result in reconciliation difficulties with the bank statement, as this is a common practice with nearly every business. It is better if a simple chronological order is followed date-wise in recording every transaction of whatever nature so that there is no ambiguity on this account. Concerning the purchase of fixed assets, the approval for the same is usually made in advance by top management. This ensures that they have approved the purchase. Budgetary allocation of funds is also evident, and all excesses of 10% or above to be signed off by the Treasurer. Payments once again are to be made by check. The automatic treatment of fixed assets of value of $5,000 and above as capital expenditure is questionable, and should be looked at on a case to case basis. Assessing Risk Factors Connected with the Acquisitions and Payment Process The risk factor involved due to concentration of the signing of all checks by the Treasurer has been indicated above. It is better that a combination of two signatures be required on every disbursed check. One can be the Head of Department or VP of the section of the business to which the check pertains, and the other would be the Treasurer. The