Skip to content
Solved Assignments

ACC 491 Week 4 Team Assignment: Apollo Shoes Case - Revenue and Purchasing Cycle Audit

A team-based assignment analyzing the Apollo Shoes case, focusing on revenue and purchasing cycle auditing.

Preview 4 of 11 pages

See the first 4 pages exactly as they appear in the document.

  1. Page 1
    Read page 1 as text

    Acc 491 Week 4 Memo 1 ACC 491 Week 4 Team Assignment: Apollo Shoes Case - Revenue and Purchasing Cycle Audit Based on the Apollo Shoes Case Assignment, critically analyze the control weaknesses identified in the Revenue and Collection Cycle and their potential impact on the financial reporting process. In your response, explain the specific areas where Apollo Shoes' internal controls are deficient, the audit implications, and the recommendations provided to improve the control procedures. Additionally, discuss the importance of effective internal controls in ensuring the accuracy and reliability of financial statements. Your response should be between 700 - 1000 words.

  2. Page 2
  3. Page 3
    Read page 3 as text

    Acc 491 Week 4 Memo 2 ACC 491 Week 4 Team Assignment Apollo Shoes Case Assignment Date: Memorandum T o: Audit File CC: Santos A larcon, Jr. From: B Team Date: 2/12/2025 Re: Apollo Accounting and Control Systems: Revenue and Collection Cycle Details of Control Issues Encountered in the Revenue and Collection Cycle Objectives: Apollo’s control procedures were tested to obtain control evidence about the validity, authorization, accuracy, and proper period recording of recorded sales. The accuracy of classification of sales postings to individual customer accounts receivable was also tested. Systems tested included authorization, segregation of duties, information processing controls, such as general, application, and controls over the financial reporting process, physical controls, performance reviews, and controls over management discretion in financial reporting. Our objective was to perform enough in - depth auditing to provide assurance about errors and fraud in the accounts. The internal controls were tested for effectiveness using samples of transactions. This was done in accordance with audit standards. Results: The revenue cycle test of controls for year end 2007 resulted in 51 deviations of 120 sample transactions. 15 of those transactions resulted in credit memos for inaccurate pricing or quantities billed. The majority of credit memos were processed in the third quarter and none were processed in the first half of the year. 31 had no credit approval of which 10 are outstanding at the date of this audit. The total outstanding

  4. Page 4
    Read page 4 as text

    Acc 491 Week 4 Memo 3 invoices without credit approval total over $27 million. Several bills of lading were missing and a couple arithmetic errors were mad e. Response: The unreliability of Apollo’s revenue and accounts receivable controls required the audit team to do more extensive testing. Positive or negative confirmations were needed on most accounts. Apollo customers were asked to verify total sales during the year if not current at the date of the audit. The finding that all credit memos processed were in the second half of the year indicate that control procedures were not uniform for the year. Additionally, December deviations are potential cause of misstatement in the financial statements. Management is advised to implement and follow control procedures throughout the year. Credit approval is not being done as required and results in collection issues. Credit approval and timely collection procedures will reduce the financial problems as were seen in the fourth quarter. Missing bills of lading, substantial arithmetic errors with delay in correction, and deviations resulting in credit memos for overcharges only (no undercharge errors found) are red flags for potential fraudulent transactions. The missing bills of lading suggest improperly recorded sales, the lack of mixture of over and under charges, and the lag time between errors and credit memos are suggestive of misstatement and possibly fraudulent activity. Recommendations: Bridge working papers summarize Apollo’s strengths and weaknesses. Apollo is advised to implement and maintain effective control procedures that can be adhered to throughout the year. Some recommendations include: • Pre - numbered bills of lading with location and explanation of missing BLs determined. • Credit approvals should be done for every transaction regardless of history or size. • Sales orders should be secured properly and numbered reducing the risk missing or altered sales orders. • Create an electronic signature such as a PIN number for telephone orders to ensure that the customer placing the order is responsible for payment. • Payment terms should be indicated to customers at time of purchase. • Collection procedures should be implemented to increase cash flow.

7 more pages in the full document

Unlock it once and it stays in your library, ready to chat with or turn into flashcards.

Unlock the full document

More Accounting study materials

See all

Study this document with CramX

Once it is in your library, every tool can work from it.