Assignment: Significant Deficiencies in Accounts Receivable In this Assignment,

Question

Assignment: Significant Deficiencies in Accounts Receivable
In this Assignment, you will research significant deficiencies during the course of an
audit you are engaged to perform.
You are conducting the audit of A-One Travel. There are two major concerns you have
in A-One’s operations:
1. When a customer purchases a travel package via credit card, the accounting
department records a debit to accounts receivable and a credit to sales.
However, if the customer cancels the package, no entry is made at the time of
cancellation. The customer must request a refund in writing and only then is the
credit card refunded and reversing entries made. As expected, customers call AOne
upset that their credit card charges have not been reversed in a timely
matter, as they were not clearly made aware that refund requests must be made
in writing. (This policy is stated on the company website, but it is very difficult to
find.)
2. As a result of this policy, some customers are never given refunds because they
do not submit a written refund request. Because no reversing entries were made,
these still appear as valid credit card sales on A-One’s books. You speak to AOne’s
president, who states that it is not his problem if his wealthy clientele
overlook the charge and are not concerned with getting their money back. He
sticks to his company policy and does not offer “freebies.”
Checklist: In your analytical essay address the following:
1. Because this is a situation you have never before encountered, you will need to
research significant deficiencies. Describe what significant deficiencies are and
how you think this situation applies.
2. Discuss your responsibility in informing the audit committee of this situation, if
you feel the need to inform them at all.
3. Should the company policy be addressed elsewhere as part of the audit? If so,
where and how should it be explained?
4. Even though the A-One’s policy is completely legal, do you feel you have to
discuss it with A-One’s board to make the refund policy more ethical or at least
more transparent to customers?
5. How does this policy affect what you report as sales and accounts receivable on
the financial statements?
1
Critical Elements:
Write your original analytical essay in Standard American English. Please
be sure to include an introduction, body (addressing all the checklist
items), and conclusion.
Pay special attention to correct grammar, style, and mechanics.
Respond to the checklist items in a complete manner.
Ensure that your viewpoint and purpose are clearly stated.
Demonstrate logical and appropriate transitions from one idea to another.
Your paper should be highly organized, logical, and focused.

Explanation / Answer

Solution-

The A-one travel is a company providing tours and travel service to its customers. The company has provided online booking facility to its customers. Willing customer can purchase their desired travel package via credit cards. The cancellation facility, if customer is unwilling, is also provided by the company.

During the course of my audit of A-one travel the following discrepancies in the policy of company are observed:

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