Question

Audit Program Project 20 points The purpose of this project is to link the assertions by management (PERCV) and the audit procedures performed by auditors. 1. Choose either one account from the list below to write an audit program. Get your choice approved, since only one person will be able to do each type of account (except the ones listed as available for 2 if more than 23 students. Prepare a brief audit program using the format below. Choices: (1) Cash (if needed, 2 can do) (2) Financial instruments and investments (3) A/R (4) Notes receivable (5) Interest receivable (6) Inventory (if needed, 2 can do) (7) PPE (if needed, 2 can do) (8) A/P (9) Sales tax payable (10) Amounts withheld from employees pay (11) Unclaimed wages (12) Customer deposits (13) Interest payable (14) Accrued property taxes (15) Accrued payroll (16) Accrued payroll taxes (17) Income tax payable (18) Notes payable (19) Pension plan accruals (20) Accrued PTO (21) Product warranty liabilities (22) Accrued commissions and bonuses (23) Bonds payable
cash pleased

Answer 1

Test Completeness, Accuracy, Existence and Cutoff:

1. Obtain or prepare a comparative summary of period-end cash balances.

Trace totals to the general ledger and the previous audit's working papers.

2. Ascertain that all bank accounts are included in the summary;

Enquire as to why any account on the last audit summary is omitted from the current audit summary.

3. TEST MATHEMATICAL ACCURACY OF BANK RECONCILIATIONS

Obtain copies of the division's bank reconciliations and test their mathematical accuracy.

4. TRACE BOOK BALANCES TO THE GENERAL LEDGER

Trace the book balances on the division's bank reconciliations to the comparative summary.

5. SCAN PERIOD-END BANK RECONCILIATIONS

Scan the period-end bank reconciliations for significant unusual reconciling items and adjustments made to agree the reconciliations to the comparative summary. Obtain evidence supporting these items and adjustments by inquiry or examination of supporting documentation.

6. CONFIRM CASH BALANCES

Confirm selected period-end balances by direct correspondence with banks. Consider including all accounts open during any part of the period. The confirmation request should include inquiries as to the amount of the account balance and whether the account bears interest.

7. TEST BANK RECONCILIATIONS

Review reconciling items on the bank reconciliations as follows:

a. Obtain bank statements and related supporting documents (if normally available) for the period subsequent to the balance sheet date.

Note: In circumstances where there is a lack of segregation of duties over cash functions, consider whether bank statements and related supporting documents should be obtained directly from the bank.

b. Trace outstanding checks listed on the bank reconciliations, but not listed on the bank statements obtained in (a) above, to the cash disbursements records for the period prior to the balance sheet date.

c. Trace deposits in transit on the bank reconciliations to the subsequent bank statements and the cash receipts records for the period prior to the balance sheet date.

d. Trace other reconciling items to supporting documentation and entries in the cash records.

8. TEST COMPLETENESS OF CASH TRANSACTIONS

Determine how the division ensures the completeness of cash transactions (i.e., receipts and disbursements). Obtain evidence that the procedures operate as prescribed.

9. TEST MATHEMATICAL ACCURACY OF CASH RECORD

Test mathematical accuracy of cash receipts and disbursements records and the postings of those records to the cash control account.

10. EXAMINE BANK STATEMENTS FOR RECONCILING ITEM

Determine that paid checks, deposits, and debit and credit advices appearing on the bank statements obtained in step 7 above issued on or before the balance sheet date appear on the period-end reconciliations.

11. EXAMINE CASH RECORDS FOR RECONCILING ITEMS

Examine cash receipts and disbursements records for a period before the balance sheet date to ascertain that all reconciling items are appropriately included in the division's bank reconciliations.

12. TEST TRANSFERS BETWEEN THE DIVISION'S BANK ACCOUNTS

Determine whether any transfers of funds between the division's bank accounts have occurred near the balance sheet date. Verify that the transfers were recorded in the books in the same accounting period and that any transfers not recorded by the bank in the same accounting period appear in the appropriate bank reconciliation.

Review Restrictions and Related Disclosures

13. ENQUIRE OF MANAGEMENT ABOUT CASH RESTRICTION

Enquire of divisional management whether cash balances are restricted as to use or are the property of others. When balances include the property of others, determine that the related liability has been recorded. Determine that appropriate disclosures have been made.

Additional Procedures

14. COUNT CASH ON HAND

Where material, establish physical control over cash on hand as of the balance sheet date and count it in the presence of the custodian(s). Obtain the signature of the custodian(s) acknowledging that funds were counted in their presence and returned intact.

Reconcile balances as determined in step 14 to control accounts and trace reconciling items to supporting documentation. If the count is at a date other than period-end, reconcile activity to the balance sheet date. Determine whether there are unreimbursed expenses that should be reflected in the accounts.

15. CONSIDER CHECKS RELEASED AFTER PERIOD-END

Determine through inquiry whether any checks drawn before period-end were released after period-end. Consider obtaining the numbers of the last checks written for the current financial period. Consider whether any reversing entries are necessary.