Intro and Conclusion

1

WEEK 2 TEAM ASSIGNMENT

Week 2 Team Assignment

Learning Team B

ACC/492

7/24/16

Introduction

AUDIT PROGRAM FOR CASH

Risks

· Cash transactions may not be documented correctly

· Does cash exist

· Fraud

Steps

1. Discuss and document the routine for receiving and disbursing cash.

a) Sources of cash

b) Frequency of bank deposits

c) The person making the deposit

d) The various levels of cash received, is it appropriate

e) Documentation of expenditures (check requests, agreements, invoices…)

f) The approval process

2. Confirm selected bank accounts and special activities

For the petty cash funds (Is the petty cash voucher maintained properly?)

Are physical cash counts:

a) Conducted regularly by a person or people who are not direct guardians of the petty cash funds?

b) Reconciled with the petty cash voucher?

c) Documented the counts and reconciled against the petty cash voucher?

d) Are the petty cash funds restricted to only authorized personnel? Who has contact to funds?

For all checking accounts

a) Identify how many signatures are mandatory on each check.

b) Identify the process by which cash is received and how often.

c) Acquire bank statements for each bank account.

d) Identify the frequency and timing of the bank reconciliations. Who is responsible for the reconciliations?

e) Acquire bank reconciliations and test for accuracy.

f) Affirm if an additional person reviews bank reconciliations on a regular monthly basis. The review document should include the date of examination and a signature of the second person reviewing the bank reconciliation.

3. Test bank reconciliations

Choose bank accounts for confirmation in order to obtain a moderate to low level of assurance that the above mentioned audit purposes are achieved.

a) Test the mathematical accuracy of bank reconciliations

b) Trail-back to the book balances on the client’s bank reconciliation to the summary.

c) Trail-back to the balances on the client’s bank reconciliation to the bank statement.

d) Test reconciling items on the bank reconciliation by performing the following:

i) acquire previous month bank statement and supporting documents

ii) trace outstanding items listed on the bank reconciliation.

iii) trace deposits in transit listed on the bank reconciliation.

iv) get explanation of big, uncommon reconciling items and trace to supporting documents.

v) investigate any other unusual items.

Confirmation requests should be sent under our control and, second requests and, where warranted, third requests should be mailed when responses to confirmation requests have not been received within a reasonable time.

Consider sending a special inquiry letter to ascertain the existence of special arrangements or restrictions, for example, compensating balance arrangements, security arrangements, written guarantees.

4. Review confirmations received

For confirmations received:

a) compare account information and account balance to matching summary.

b) research all inconsistencies conveyed or questions raised in review and determine whether any adjustments are necessary; and

d) research all inconsistencies conveyed or questions raised in review and determine whether any adjustments are necessary.

4. Test accounts without receipt of confirmation

If bank confirmation is not received and you are willing to waive the receipt of the bank confirmation, deliberate on contacting the bank directly to gain the information needed to obtain a high level of assurance that the above-mentioned audit objectives are met.

AUDIT PROGRAM FOR SALES

I. External customer confirmations

a. Test the balances confirmed against general ledger balances

II. Confirm that sales are recorded in the proper periods

a. Review invoices and shipping documentation to evaluate timing

III. Accounts Receivable includes all balances owed to the entity at reporting date

a. Test invoices that were issued around period closing date to evaluate timeliness

IV. Accounts receivable balances are owed to the entity and not outside parties

a. Test general procedure to ensure completeness

b. Test of confirmed external balances

c. Test by general inquiry of company personnel

V. Sale and accounts receivable are in proper periods

a. Cut off tests to ensure proper posting

VI. Accounts receivable are presented at the correct amounts

a. Testing of unit prices versus quantities shipped

b. Review of company procedures for aged receivables

VII. Accounts receivable are correctly described and classified on the financial statements

a. Testing of transactions and follow through to general ledger

b. Review the draft financial reports

Specific Risks and Nature of Company

The "Exxon Mobil 2015 Form 10-K "exhibit 1A, for Exxon Mobil, is the largest company that operates in different countries which puts the business at risk of having more financial issues in general. The company has financial operation has been subjected to inherent risks which that occurs in locations where there is no action of control system in place. An assertion misstatement of material with no control systems, inherent risk is more susceptible. Inherent risk: - misstatement is greater for some assertions and related financial balances or classes than for others. Comparatively it is much easier to misstate in a complex calculations than simple calculations. More so cash is at risk suspected to theft In this case the risks such as inventory overstatement, influenced by the development of technology that might make particular product obsolete. Supply and demand another fact that potentially leads to inherent risk of Exxon Mobil due to the fact that it deals with fundamental commodity business thus putting its earnings and operations at risk when changes on the market price of oil, gas, and petrochemical. Lastly economic conditions just like any another energy and petrochemicals demand all over the world have a mutual relationship with the growth rates of the economic in general.

Control risk: - misstatement materials could occur in assertion, but could not be prevented on time on time of internal control. These kind of risk basically functions according to the implementation a well-designed and effective system and its operation on internal control of the company on achieving its goals that have been set when it comes to financial statement. This kind of risk mostly exists due to internal control limitations.

Conclusion

Reference Page

· Exxon Mobil 2015 form 10-K. (). Retrieved from http://www.xom10k2015.htm (8,002k)

· Arens, A. A., Randal, J. E., & Beasley, M. S. (2014). Auditing and assurance services: An integrated approach.(15th ed.). Upper Saddle River, NJ: Pearson.