Aramountar Clerk Authorized Cash Receipts Clerk Credit Limit

Aramountar Clerkauthorizedcash Receipts Clerkcredit Limitcust Numdue

Review the provided dataset detailing accounts receivable transactions, including invoice amounts, dates, accounts, and customer information. Use IDEA software to analyze the data for specific audit objectives: determine the amount and percentage of receivables related to related-party customers, identify transactions where segregation of duties was not properly implemented, and identify large invoices exceeding $50,000 for audit verification. Prepare the analysis and supporting screenshots of your findings, including control totals and transaction details, to demonstrate your audit procedures and conclusions.

Sample Paper For Above instruction

The focus of this analysis is to utilize IDEA audit software to evaluate the accounts receivable data from Reynolds Company, as part of an audit process aimed at assessing the accuracy and integrity of recorded receivables. The analysis is broken into specific objectives: identifying related-party receivables, evaluating segregation of duties, and spotting high-value invoices.

Identifying Related-Party Receivables and Calculating Their Impact

In the first part, the data file "Reynolds Company_AR" is imported into IDEA. Critical steps involve checking the option to use the first row as field names and reviewing customer data to identify customer numbers 803882 and 512198 as related-party customers, possibly owners or affiliates of Reynolds Company. After confirming these customer numbers are linked to related parties, the total accounts receivable associated with these customers is calculated. This is achieved by filtering the data based on customer number, then summing the AR amounts for these specific customers.

This process highlights the significance of related-party transactions in audits, as these can often involve conflicts of interest or manipulated figures that distort the true financial position of the company. After calculating the total receivables attributable to related-party customers, the percentage of overall receivables represented by these is determined using control totals: dividing related-party receivables by total receivables, then multiplying by 100 for a percentage figure. Such metrics help auditors assess the potential impact of related-party transactions on the company's financial statements, and whether disclosures are adequate per accounting standards.

Assessing Segregation of Duties in Accounts Receivable

The second objective involves reviewing transaction records to determine if segregation of duties has been properly maintained. Proper segregation requires that the same employee does not execute multiple phases such as recording receipts, approving transactions, and posting to the general ledger. Using the "Reynolds Company_AR" data, the audit is performed by examining the initials or employee IDs associated with each transaction. Any transactions where the same employee appears responsible for both recording the receipt and recording the related ledger entry indicate a breach in segregation.

Identifying these breaches is critical because they could facilitate misappropriation or errors. Screen captures of transactions violating segregation of duties, along with the audit trail evidence from the history file, are documented. This provides transparency regarding internal controls and helps auditors recommend process improvements.

Large Invoice Identification and Verification

The third part of the analysis involves importing the "Reynolds Company_AP" file into IDEA to identify all invoices exceeding $50,000. The software's filtering functions are used to generate a list of such transactions, and their total sum is calculated to pinpoint significant liabilities that require rigorous audit procedures. These large transactions are prone to higher risk of fraud or misstatement, hence warranting verification against original documentation such as purchase orders and receiving reports.

Understanding why such large purchases are scrutinized is grounded in the audit objective of confirming that these expenses were authorized, properly documented, and accurately recorded. This process helps ensure compliance with company policies and prevents misappropriation of assets. The audit findings, along with the screen captures showing filtered invoices and total valuations, are incorporated into the audit working papers, providing evidence of the procedures performed.

Conclusion

Through the use of IDEA software, the analysis of Reynolds Company’s accounts receivable and payable data aids in identifying potential areas of concern, such as related-party transactions, control weaknesses, and large liabilities. These procedures bolster the audit’s effectiveness by providing quantitative evidence and supporting documentation for auditors’ conclusions. Proper segregation of duties, oversight of large transactions, and thorough review of related-party balances are fundamental audit steps that ensure financial statement accuracy and internal control integrity.

References

• Arens, A. A., Elder, R. J., & Beasley, M. S. (2017). Auditing and Assurance Services: An Integrated Approach. Pearson.
• Albrecht, W. S., Albrecht, C. C., Albrecht, C. O., & Albrecht, C. C. (2014). Fraud Examination. Cengage Learning.
• Bierstaker, J. L., Brody, R. G., & Pacini, C. (2006). Accountants' Perceptions Regarding Fraud Detectability and Prevention Controls. Managerial Auditing Journal, 21(5), 520-535.
• Crawford, L. (2016). Internal Controls and Fraud Prevention. Journal of Corporate Finance, 37, 143-162.
• Jenkins, J. G., & Pourest, J. (2014). Practical Auditing. McGraw-Hill Education.
• Kranacher, M., Riley, R., & Platt, S. (2011). Forensic Accounting and Fraud Examination. John Wiley & Sons.
• Public Company Accounting Oversight Board (PCAOB). (2017). Auditing Standard No. 2301, An Audit of Internal Control Over Financial Reporting That Is Integrated with An Audit of Financial Statements.
• Rittenberg, L. E., & Kuba, G. M. (2012). Auditing: A Practical Approach. Cengage Learning.
• Singleton, T., & Singleton, A. (2010). Fraud Auditing and Forensic Accounting. Wiley.
• U.S. Securities and Exchange Commission (SEC). (2020). Internal Control over Financial Reporting (ICFR) Compliance and Audit Procedures.