The Audit Report and Internal Control Evaluation The final stage of an audit
The Audit Report and Internal Control Evaluation The final stage of an audit PRG211
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Date Created: 11/11/15
The Audit Report and Internal Control Evaluation The Audit Report and Internal Control Evaluation The final stage of an audit process involves the audit report The audit report is a means for communicating several factors regarding the audit such as 0 identifying issues and its causes 0 expressing effects and repercussions of the identified issues 0 measuring performance 0 suggestive tool for management involving necessary needed changes 0 suggestive solutions practical and cost effective and 0 provisions for followup of actions taken by the entity Internal audit manual nd Such a report is a provider of immense value to a company like Apollo Shoes Through this audit report Apollo can review areas that display risks that can be detriment to the company based on the auditor s findings and opinions Eternal users such as creditors shareholders or vendors can also benefit from the audit report through information displaying the financial health of Apollo Management can review the company s weaknesses and suggestions to turn the weaknesses into strengths For example presently Apollo is experiencing a strike and overwhelming debt Through the current period s audit report Apollo s constituents can review the status of these occurrences and determine if this company will be able to raise resources to continue operations In addition to the value of an audit report management can determine if the company is experiencing any potential fraudulent activities The Audit Report and Internal Control Evaluation 2 To complete an audit report based on reasonable assurance the auditor must gather sufficient and substantive evidence to support her findings According to the Internal manual Part three nd For most audits the required level of assurance is obtained from a number of audit procedures including the evaluation of controls and the selection and examination of a sample of items p 26 The amount of evidence to gather depends o the type of audit procedure sample size selection from the population and timing of performance of the procedure Arens Elder amp Beasley 2012 The evidence gathered for this audit are internal documentations and confirmations positive and negative that consist of 0 bank statements bank reconciliations and direct bank confirmations to support document tracing to the recorded items of cash accounts 0 accounts receivable aged trial balances and accounts receivable confirmations mailed to Apollo customers vendors to support sales transactions recorded 0 inventory documentation invoices count sheets post count reports and lead schedules to support document tracing to the recorded items including purchase invoices 0 direct insurance confirmations from providers to support transactions for prepaid and other assets Louwers amp Reynolds 2007 After gathering the evidence the audit team initiates sampling and testing procedures The audit team selects to sample the entire bank statement population to conduct the following testing procedures on cash transactions 0 cutoff bank statements to verify against outstanding check list for accurate recording The Audit Report and Internal Control Evaluation 0 balances from bank statements to compare with direct confirmations from the banking institutions In regard to the accounts receivable transactions the audit team selects sampling of the positive and negative accounts receivable confirmations from customers to conduct the following testing procedure 0 verify the existence of the accounts receivable over 60 days and the gross value of the receivables against the company s accounts receivable aged trial balance The audit team selects to sample a number of unit costs from the inventory invoices to conduct the following testing procedure 0 verify match between inventory lead schedule and inventory status report The audit team selects to sample canceled checks and accounts confirmations from Apollo s insurance providers to use toward conducting the following testing procedure 0 verify prepaid account balances by comparing entire prepaid accounts against direct confirmations The following report was written for the audit of financial statements of Apollo Shoes Inc The Audit Report and Internal Control Evaluation 4 Independent Auditor s Report To the board of directors and shareholders of Apollo Shoes Inc We have audited the accompanying balance sheet of Apollo Shoes Inc as of December 31 2007 and the related income statement statement of cash ows and statement of owners equity for the year then ended It is the responsibility of management to provide adequate and sufficient financial statements Our responsibility as auditor is to express an opinion on these statements based on the results from our audit It is also our responsibility to express an opinion on the internal control position of Apollo Shoes Inc Therefore we have also completed our audit of management s assessment of internal controls Based on the information gathered during our audit of the company s financial information we have determined that Apollo Shoes management has implemented effective internal controls over financial reporting This audit has been conducted in accordance with generally accepted auditing standards Those standards require that we plan and perform the audit to obtain reasonable assurance not absolute about if the financial statements are free of material misstatement An audit includes examining on a test basis evidence supporting the amounts and disclosures in the financial statement The Audit Report and Internal Control Evaluation 5 presentation We believe that our audit provides a reasonable basis for our opinion We believe Apollo Shoes Inc has an effective internal control system that allows compliant financial reporting in accordance to generally accepted accounting principles These controls put in place by Apollo Shoes proves to be successful in the prevention of misappropriation of assets inaccuracy in financial reporting and other fraudulent activities In our opinion that the financial statements referred to above present fairly in all material respects the financial position of Apollo Shoes Inc as of December 31 2007 and the results of its operations and its cash ows for the year then ended in conformity with generally accepted accounting principles In our opinion Apollo Shoes Inc maintained an effective internal control system in all material respects over financial reporting The accompanying financial statements have been prepared assuming that Apollo Shoes Inc Will continue as a going concern As discussed in Note 1 to the financial statements Apollo Shoes has suffered recurring losses from operations and has net capital deficiency that raises substantial doubt about the company s ability to continue as a going concern Management s plans in regard to these matters are also describe in Note 1 The financial statements do not include any adjustments that may result from the outcome of this uncertainty Phoenix International The Audit Report and Internal Control Evaluation January 20 2013 References Arens A A Elder R J amp Beasley M S 2012 Auditing and assurance services An integrated approach 14 ed Retrieved from The University of Phoenix eBook Collection database Internal audit manual Part three nd Retrieved January 18 2013 from httpWWWfinancegovmlltfilesul0part3Auditskilsandtechniquespdf Louwers T J amp Reynolds J K 2007 Apollo Shoes Inc Retrieved from The University of Phoenix eBook Collection database
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