In: Accounting
1) For auditing sales and accounts receivable cycle accounts the auditor should take care of the following
Sales and Account Receivables is the money client and consumers owe to a company.Auditors should use substantive procedures to test the balances of accounts receivable. Substantive audit procedures are direct tests using specific information from a companies accounting system and financial statements.
Auditor should usually pull a sample of clients or customers from company's accounts receivables ledger and review them with the original information that resulted in the current balance.This is important because a company can easily create fraud account balances by simply adding fake clients to bloster their financial statements.
Auditors should interview the employees who handle customer accounts to determine how well the company operates. Interviewing them will help the auditor to know how well the staff is trained to ensure that there will be more chances of more error in undertrained employees.
Auditor should contract the company's major clients and request the client to verify their accounts payable amounts owed to the company. Auditor should match this external information with the internal information cto know the real truth.
Testing the payoff process for accounts receivables is important partz of auditing process. Auditors review when the company was paid for goods and services and how long it took the company to the open accounts receivables. Variations shoul be justified and auditor should take strict steps to curb the deficiency.
B) For auditing purchases and accounts payables cycle the following should be done:
Use of either the lower assessed level of control risk approach or primarily substantive approach or a combination of the two may be appropriate for auditing the purchases and accounts payables cycles
For the purchases the auditor should look into the original requisition orders, original invoices and bank statement should be verified for the payment verification process Moreover auditor shouk check the vouchers for a form indicating the vendors, amount due and payment dates for purchases received.
The auditor should also check for the level of authentication and authorisation required for the purchase orders. Computer files should contain the data approved vouches for the inventory and general ledger master file.
For accounts payable a sample size should be selected to measure the audit procedures are being followed or not. The auditor should match the balances with the major database asking with original receipts to ensure that there are no gap between the two.
The auditor should select the major creditors and ask the confirmation from them to ensure that the true outstanding are shown in the account and any fake account do not exist.
The creditors payment cycle should also be looke d into to ensure that there are no dummy payments being done.
C) For auditing the payroll the following should be the action plan:
Payroll is one of the most important task of any business. Payroll auditing should take place atleast once a year but once every six months is the ideal way to stay on top of the process without having to make huge corrections to the mistakes identified.
Verify each person that worked for the company during the work time period that is listed on the payroll ledger.
Make sure that pay rate for each employee is accurate. Track all the pay increases and promotion being granted. Every such thing should have some paperwork and documentation to justify the auditing.
Make sure that the total from payroll reports which includes witheld taxes, gross payroll expenses and net check amount are in sync with general ledger accounts.
Ensure that checks cleared in BRS documents should match with payroll report.
Compare the tax remittance reports with the payroll reports to make sure that all the payments are in compliance with the Tax Revenue System.