estion 2: d. Lucky you new audit senior._Your boss, the audit manager for Ibex I
ID: 2536447 • Letter: E
Question
estion 2: d. Lucky you new audit senior._Your boss, the audit manager for Ibex Inc. also want you to re-write the audit program for the current year 2018. Ibex's year end is December 31 e. A number of changes occurred in late 2017 and early 2018 regarding internal control procedures at the_company and believe all for the good in that internal control, via management's assertion, are stronger and more reliable. of course, Ibex thinks the audit can now be performed in less time and Ibex already asked the manager “Can we expect a reduction in our fees?" f. Thus, you are tasked with updating the audit program regarding testing controls in the revenue and collection cycle. The audit manager and you will be meeting with the client to discuss, among other things, audit fees, scopc of work, timing of the work, etc g. Requirements 1. Prepare an audit plan, in good form, entitled: Ibex Inc. Tests of Controls Revenue and Collection Cycle. It is now May 1, 2018. The client's year- end and the audit date are December 31, 2018. Use the supplied audit work program forms 2. Discuss the importance of sending confirmation lcttcrs to customers How would you go about this task?Explanation / Answer
Ibex.inc Audit plan Test of controls revenue and collection cycle?
The revenue and collection cycle in business has set of procedure that begins when customer purchase goods or services ands when company receives complete payment for purchase.so following are steps for audit plan
1.firstly check how strong and reliable is our internal audit system.if they are strong we can reduce amount of transaction testing.
2.we can select random sample of transaction and examine the related purchase order,invoice etc.
3.if all purchase order approved by manager then we can check only his signature.
4. if error and fraud found we increase amount of transactional testing.
5.Amount of sale and accounts receivable should be verified by individual transaction.
6.we should assess the inherent risk associated with revenue cycle and perform test to determine that it is free of error or fraud.
7.we should consider cut off dates for particular type of sales and management presumptions
8.for revenue cycle we should examine gross profit margin and amount of growth,maximum capacity of sale.
9.if high ethical standard and strong control adopted by management then we should check ?1.who accepts and approve credit sale.2.shipping and recording sales order.3.appropriate documentation for collecting and depositing cash and recording receipts.4.appropriate authority and documentation to grant discount for early or cash payment.
10.determine about account receivable that is uncollectible and should be written as bad debts.
2.lmportance of sending confirmation letter to customers?
Customers are life blood of business .without customers business can not be done.As customers are very closely touched to business .so management should adhere about their responsibility towards customer.As an auditor we can discuss with the representative of customers about policy matter of company regarding payment cycle,credit policy,discouny policy and other related matters.If are doing any changes in policies related to customers then we should inform them and ask about their consent through confirmation letter.
2.Account Receivable balance are tested by sending confirmation letter to customers for obtaining objective assurance that balance is correct..
3. So if we take our customers in confidence about policy matters related to them and take their confirmation then our business grow rapidly.
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