The audit report and internal control evaluation. Apollo Shoes Inc - Essay Example

? The Audit Report and Internal Control Evaluation Independent Auditors Report To the Audit Committee Copy Shareholders and the Board of Directors Apollo shoes company Address xxx An Unqualified Audit Report of Apollo Shoes Company Introduction The auditing process of financial statements and evaluation of internal control systems of Apollo shoes was perfect. This is a report of findings, and recordings of the audit firm as of 31st December 2011. The audit follows the basis on the international Standard of Auditing and general accepted audit standards of United States of America. Key target of the audit is to obtain a reasonable assurance on whether there are any material misstatements on the financial statements. This will lead to drawing an opinion to the shareholders regarding the state of financial records (Ainapure, 2011, p. 26). Background Apollo shoes Inc. is a leading company in the United States of America. In reference to the evaluation conducted by the audit company, the Apollo management team is highly competent with certified employees. The management team comprises of 13 members and an executive committee of three members. The company's revenue of the year ended 31st December 2011 $108 million. This is a 6% increase in reference to the working papers of previous auditor. It also has over 600 full time employees, 3500 part-time graduates, and 1000 undergraduates. The company has many branches all around the States to increase the net revenue. In this financial year, the company won different awards as a result of its quality management strategies. This has raised the creation of a sustainable business environment in such a competitive economy. It proves to be among the best performing companies in this line. Accounting sampling and testing procedures The audit entailed different sampling and testing procedures. This is to provide material evidence before presenting the opinion to the shareholders and directors. Tracing the flow of transactions and authorization is the crucial task in auditing. This is because auditors will identify transaction initiation and completion by the company. The audit team also made a detailed compliance test seeing whether all guidelines within the company are functional. A test on the control system is pivotal in auditing; its helps the auditor to identify the extent of other tests. In reference to the audit team, it is evident that Apollo shoes management is competent in implementing these tools. This implementation is responsible for immaterial gaps in the company. The auditing team gives all recommendations and management action plans to cover these gaps. Risk Exposure From the audit analysis, internal auditors perform detailed risk analysis targeting all areas of concern of the company. The key target areas are cash inflows, grant activities, operating systems, level of external rules and regulation among others. The objective of evaluating risk exposure through the internal audit team is identifying all entities that should receive audit attention (Ainapure, 2011, p. 32). Scope The main aim of auditing the statements is to represent the shareholders in affirming the fairness of the statements. It also helps in determining whether they are in accordance with the accepted accounting standards of USA. The audit includes testing, examining basis, evidence on the supporting information, and disclosing the financial statements to all parties. It also includes a review of administration grant, safety, network security, and service centre. It covers the period from 1st January 2011 and 31st January of the same year. This is in reference to Apollo Shoes financial year. The report has made a combination of analytical review procedures on the financial statements (Ainapure, 2011, p. 36). Opinion In accordance with the financial statements presented by the management of Apollo shoes Company, the company’s financial statements are in line with the USA accounting standard. This is in reference to the financial records of the year ended 31st January 2011. The audit also confirms that all operations and cash flows are true and fair. This proves that Apollo shoes Company has true and fair financial statements. This is because the identified areas are immaterial. There is an outline of areas that need concentration to ensure that future audits are undemanding and free from compliance faults (Ainapure, 2011, p. 36). Overall Assessment From the audit reviews, there is an indication that the Apollo Shoes management has controls which play a role of suppressing risk occurrences. There is also a notification stating that some employees do not follow the provisions of these controls consistently. The audit team has put down a list of suggestion to address to the issue. Below are the action plans and recommendations. 1. Server Security and Workstation Recommendations Apollo Shoes Inc. should implement additional industry standard guidelines, and integrated information system technology for computer configurations. The aim of this is to empower information technology as well as increasing the level of security. These suggestions will tighten the users’ accounts management and settings by blocking entries of unauthorized parties. It will also improve the backup strategy, ensure adequate resources to maintain and secure data, and enhance accounts with different privileges. Basis and Benefits This will increase the security configuration settings and provide assurance that confidential information does not fall in wrong hands. It will also block all unauthorized access and ensure a high degree of integrity. Management Action Plan Apollo Shoes Company Security policy is under development. This will address areas of concern following auditors’ identification as addressed below. The new plan will follow Security standard provided by leading companies, which deal with business security. As proposed by the Auditing Company, Apollo shoes Inc. tends to implement the new security guidelines in the next one month. 2. Safety and Health: Inspection Reports Recommendation The audit team recommends designing of a follow-up and monitoring system for environment safety and health services. This will ensure that all employees are safe in case of accidents within the workplace. This will also help in ensuring that employees have adequate attention in case of illness in a formal, timely manner. Basis and Benefits This will lead to the formulation of a response and action plan to handle all hazards identified by the auditors. These actions will also reduce losses associated with accidents, personal illnesses, and the cost of paying high insurance premiums resulting from high risks. Management Action Plan Apollo Shoes Company will inspect the recommendations in the provisions made by the auditing firm. It will also form a distinct team or committee that will always analyze upcoming health and safety issues within the company. This team will ensure strict application of written health and safety guidelines. Their design will be in reference with the provisions made by the Auditors. They will also incorporate emergence issues in relation to environmental health and safety. 3. Grant Administration Recommendations The audit firm recommends the company to provide additional training to both administrative and the rest of the faculty regarding the company's expenditures. This will also include rules and regulations that apply to the company's grants. Basis and Benefits Providing training in reference to expenditures will help in reducing avoidable expenditures in the company. The audit team designed the recommendation because the company has been incurring much avoidable expenditure leading to an increase in general expenditures. From the analysis made by the auditors, it is evident that the revenue can increase with a substantial amount after these implementations. Management Action plan The management of the company is planning to reduce expenditures by 26% through different tactics. The management team together with the internal auditors will address all recommendations from the audit team. Going Concern After communication with the management team, the auditing company will offer other service such as advisory services, guidelines on how to face emerging issues, and taxation calculation. This will help the company in maintaining a competitive business environment. The company will also help the internal auditors with recent knowledge regarding audit. The management also promised to avail financial statement on a quarterly basis; this will enhance the process of auditing by ensuring that it is straightforward as this will enhance settlement of emerging issues (Ainapure, 2011, p. 45). Audit Firm Name (Signature) Date of completion References Ainapure, D. (2011). Auditing and Assurance. Texas: PHI Learning Pvt. Ltd. Read More