Audit Work Program Cycle
Introduction
The purpose of this audit work program is to identify potential weaknesses in the financial process at ABC Company and develop recommendations to remedy the issues. The program recognizes that despite the presence of internal controls within the business, the accounting cycle is still subject to errors, oversight, and abuse. The following work program is designed to test the accuracy of accounts receivable, accounts payable, and inventory records. For the most part, the audit will focus on the explanations of the accounts and any discrepancies between the trial balance and supporting documents. ABC will also be considering internal control procedures, periodicals, and accounts receivable and accounts payable records, as well as any audit findings that may have a material impact on the financial statements.
Objectives
The primary objective of this audit is to establish whether all transactions recorded in the accounting system of ABC Company are properly authorized, recorded, and reported in the financial statements in accordance with generally accepted accounting principles.
Additionally, the audit work program will assess whether all accounts are properly billed, if the accounts are properly credited and debited, and that all accounts receivable and accounts payable records are accurate. Additionally, the program will strive to identify any potential fraud within the accounts receivable and accounts payable process.
Scope
This program will cover all aspects of ABCs accounts receivable, accounts payable, and inventory accounts. Therefore, it will cover accounts receivable and payable balances, shipments, sales returns and allowances, and inventory at all of ABC’s locations.
Approach and Procedures
Substantive Procedures
When considering accounts receivable and accounts payable, ABC’s financial statements will be reviewed using a risk-based approach. The purpose of this approach is to test the validity of balances and recorded transactions.
To accomplish this. ABC will review the entire process by examining documents and confirming accuracy of the data in the form of:
Analyzing the accounts receivable aging summary
Querying discrepancies with customer accounts
Comparing transactions to pertinent documents
Verify the accuracy of invoices
Confirm credit terms
Analyze sales returns and allowances
Evaluate cut-off of receivable and payable transactions
Inspect accounts receivable records
Examine inventory records
Verify accuracy of closing process
Internal Control Tests
Testing the internal controls is a key component of ABC’s audit work program. Through this phase of the audit, ABC will evaluate the effectiveness of procedures used to ensure every transaction is properly authorized, recorded, and reported.
To complete this phase, ABC will use the following procedures:
Perform inquiry or observation to notes system weaknesses
Determine segregation of functions within the accounting system
Make sure all employees understand the process and procedures of their job
Evaluate physical security of records
Inspect authorization and approval procedures
Examine periodicals and when necessary, interrogate personnel to verify accounts receivable and payable balances
Test Controls by sampling
Conclusion
ABC will complete their audit work program in a thorough and timely manner. This program will ensure that the cycle of financial process is buttoned down tight with all of the necessary procedures in place. ABC looks forward to providing our clients with assurance that their financial statements and internal control measures are accurate.
