Final Project Scenario

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ACC 411 Final Project Scenario

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Assume you are an auditor at an accounting firm. Your team is getting ready to start a financial audit of Robbins Network Solutions (RNS). You will start with the initial review and audit preparation.

 

You know the following information about RNS.

 

Objectives of the Engagement

Audit of the financial statements for the year ended December 31, 2017.

 

Business and Industry Conditions

RNS sells and installs computers and networking hardware and software, and provides information technology consulting to businesses. It is currently developing its own computer networking software to sell to customers.

 

RNS’s success depends on attracting and retaining personnel with a high level of technical expertise who are able to provide a broad range of services. The market for staff is highly competitive.

 

The market for computers and networking products is extremely competitive. RNS’s main competitors are companies like Dell, Hewlett Packard, and Apple. RNS also competes with local and regional resellers that provide similar products and consulting services directly to customers. To be competitive, RNS has relied on its ability to provide its customers with state-of-the-art products in a timely manner. Because the company does not have the buying power of some of its competitors, it generally must charge a higher price for its products, but it is also able to provide a higher level of service and expertise to its customers to compensate for the higher price.

 

The market for computer products and technology services is sensitive to economic conditions. Economic indicators predict the U.S. economy will be relatively stagnant for the next few years, with the annual growth in spending for information technology products and services expected to be 1 percent per year for the next three years. In the past year, RNS has decided to increase sales by relaxing credit rules to provide credit to customers with slightly higher credit risk.

 

Ownership and Management

RNS is a closely held company owned by six stockholders. Two stockholders are active members of the company’s board of directors. None of the other owners take an active part in the management of the business.

 

Objectives, Strategies, and Business Risks

RNS’s primary business objectives are to increase sales, services, and consulting revenues by five percent and increase net income by seven percent each year for the next three years. Strategies to achieve those objectives include:

 

· New software development

· Aggressive marketing of products and services through increased advertising

· Sales to customers with a higher credit risk profile

 

The primary business risks associated with the company’s strategies include the following:

 

· The U.S. economy may suffer a significant downturn.

· Competitors may engage in predatory pricing to gain market share.

· Increased advertising expenditures may not produce desired results.

· Credit losses may exceed the benefits of increased sales.

· Software development activities may not generate viable products.

 

The company has developed the following responses to these risks:

 

· Frequent monitoring of economy and industry conditions

· Monitoring of competitor actions

· Hiring of a marketing consulting firm to evaluate the performance of advertising methods

· Daily review of aging of accounts receivable

· Adherence to a controlled software development budget

 

Measurement and Review of Financial Performance

Management uses the following measures to monitor the company’s performance:

 

· Inventory and receivables turnover

· Aging of accounts receivable

· Sales and gross margins by type of revenue

· Net income

· Total inventory balance

 

 

 

 

ACC 411 Final Project Guidelines and Rubric

Overview

Professional auditors are charged with the responsibility of analyzing internal controls, conducting risk assessments using analytical procedures, and designing and implementing audit programs. The purpose of any audit is to report, analyze, and determine whether a specific entity met the stated goals of the procedures being audited. The audit objectives drive the audit program, the analytical procedures, and the substantive fieldwork done by the audit team. Most people think of financial auditing when they discuss, read about, or are involved with audits because it is the most common type; however, there are many other types of audits. These include performance, government, compliance, and internal audits. This class focuses on financial auditing for the majority of the topics, which requires that auditors possess the skills and abilities to successfully implement auditing standards and procedures.

 

For your final project for this course, you will assume the role of an auditor at a large accounting firm, preparing to perform an audit of financial records for Robbins Network Solutions (RNS). As with any audit, the audit team is not always going to have access to all the information and resources they want prior to starting and working on the audit. That is real-world auditing. The assignment is intended to mimic what auditors face in their career. Do the best with what you have, using auditing standards and critical thinking. Support all your responses based on the material you have.

 

This summative assessment focuses on the preliminary audit assessment, including the drafting of a summary of findings, preparation of an audit program, and evaluation of the relationship between audit risk, audit evidence, and financial statement assertions.

 

The project is divided into two milestones, which will be submitted at various points throughout the course to scaffold learning and ensure quality final submissions. These milestones will be submitted in Modules Three and Five. The final product will be submitted in Module Seven.

 

In this assignment, you will demonstrate your mastery of the following course outcomes:

 

· ACC-411-01: Explain the use of assurance services in financial reporting

· ACC-411-02: Assess the internal controls of an entity for minimizing risk

· ACC-411-03: Analyze the impact of emerging technologies that could affect auditing

 

Prompt

Assume you are an auditor at an accounting firm. Your team is getting ready to start a financial audit of Robbins Network Solutions (RNS). You will start with the initial review and audit preparation. Refer to the Final Project Scenario document for more information.

 

Specifically, the following critical elements must be addressed. Most of the critical elements align with a particular course competency (shown in brackets).

 

I. In a concise memo, evaluate the internal controls of RNS.

 

A. Describe the major financial business transactions of the company. Include appropriate research to support your answer. [ACC-411-01]

B. Evaluate the highest business risks associated with this company. What makes you believe these specifically are the highest risks? Provide appropriate research or data to support your reasoning. [ACC-411-02]

C. What would you suggest are the appropriate types of internal controls for this industry? Why? [ACC-411-02]

D. Describe ethical issues involved with this company and industry that would have a direct effect on the outcome of a financial audit. How could these issues be addressed? [ACC-411-02]

E. Analyze current events for their impact on this company’s risk and internal control in the future. Include documentation of these current events. [ACC-411-02]

 

II. Write an audit program for internal control of cash in Word or Excel. The following internal control components must be included: [ACC-411-02]

A. Control environment

B. Risk assessment

C. Control activities

D. Information and communication

E. Monitoring

 

III. Adding to your memo from Milestone One, document your understanding of the relationship between audit risk, audit evidence, and financial statement assertions as it specifically relates to this company and industry.

A. Describe the audit data or evidence your team will review. Why is this proof important? [ACC-411-01]

B. What if a significant portion of the data is overseas and beyond the auditors’ jurisdiction or audit universe? Analyze how the audit team will compensate for that risk. What governing rules and regulations must be taken into consideration? [ACC-411-02]

C. Describe analytical procedures you will use to determine the sampling program. How will your internal control evaluation affect this step? Be specific. [ACC-411-02]

D. List and then describe the types of audit evidence you will request from the company. [ACC-411-01]

E. Describe any considerations your team will make in auditing subjective areas, including any governing rules and regulations that were factored into the auditing decisions. [ACC-411-02]

F. Describe the factors you took into consideration when planning the nature and extent of the audit documentation. [ACC-411-01]

G. Describe how responsibility for IT (computers, software, internet usage, databases) risk coverage for companies in the IT industry is defined. Is it adequate? Describe how that definition addresses or fails to address current and future risks related to social media. [ACC-411-03]

H. Describe the internal controls that are put in place to specifically protect computer data and proprietary information. How well do these controls operate within the IT industry? [ACC-411-03]

I. Where do current and future vulnerabilities exist for IT, and what must be done to manage these gaps? [ACC-411-03]

 

 

Milestone One: Internal Controls

 

Milestones

 

In Module Three, you will submit Milestone One. You are starting your audit at RNS and the first step you have to take is evaluating the internal controls of the company. This milestone will be graded with the Milestone One Rubric.

 

Milestone Two: Audit Program

In Module Five, you will submit Milestone Two. You will complete your audit program at RNS. This milestone will be graded with the Milestone Two Rubric.

 

Final Submission: Auditing Final Project

In Module Seven, you will submit your final project. It should be a complete, polished artifact containing all of the critical elements of the final product. It should reflect the incorporation of feedback gained throughout the course. This submission will be graded with the Final Project Rubric.

 

Deliverables

Milestone

 

Deliverable

 

Module Due

 

Grading

 

One

 

Internal Controls

 

Three

 

Graded separately; Milestone One Rubric

 

Two

 

Audit Program

 

Five

 

Graded separately; Milestone Two Rubric

 

 

Final Submission: Auditing Final Project

 

Seven

 

Graded separately; Final Project Rubric

Final Project Rubric

Guidelines for Submission: Your memo (combining sections I–III) must be a total of 4–6 pages (plus references cited in APA format). Use double spacing, 12- point Times New Roman font, and one-inch margins.

 

Critical Elements

 

Exemplary (100%)

 

Proficient (85%)

 

Needs Improvement (55%)

 

Not Evident (0%)

 

Value

 

Internal Controls: Transactions [ACC-411-01]

 

Meets “Proficient” criteria and demonstrates a nuanced understanding of the major financial business transactions of the company

 

Describes the major financial business transactions of the company and effectively supports them with research

 

Describes the major financial business transactions of the company, but does not effectively support the description with research or the description is inaccurate, illogical, or unclear

 

Does not describe the major business financial transactions of the company and support the description with research

 

6

 

Critical Elements

 

Exemplary (100%)

 

Proficient (85%)

 

Needs Improvement (55%)

 

Not Evident (0%)

 

Value

 

Internal Controls:

Risks

[ACC-411-02]

 

Meets “Proficient” criteria and demonstrates keen ability to use research in support of a choice of risk

 

Evaluates the highest business risk for the company, provides an appropriate rationale for the choice, and supports the choice with data or research

 

Evaluates the highest business risk for the company, but response lacks a rationale explaining the choice, or supporting research or data or the rationale provided is illogical, unclear, or incomplete

 

Does not evaluate the highest business risk

 

6

 

Internal Controls:

Controls

[ACC-411-02]

 

Meets “Proficient” criteria, and suggestions demonstrate a nuanced understanding of internal control and the company environment

 

Provides an appropriate suggestion for the types internal controls for the company and explains the reasons for the suggestion

 

Provides a suggestion for the types internal controls for the company but does not explain the reason for the suggestion, or the suggestions or the explanations are inappropriate, illogical, unclear, or incomplete

 

Does not provide a suggestion of types of internal controls for the company

 

6

 

Internal Controls: Ethical Issues [ACC-411-02]

 

Meets “Proficient” criteria and demonstrates a keen understanding of the impact of ethical issues on the outcome of audit

 

Analyzes the ethical issues that would have a direct impact on the outcome of a financial audit and provides appropriate suggestions for addressing them

 

Describes ethical issues that would have a direct effect on the outcome of a financial audit but does not provide suggestions for addressing them, or the issues or suggestions are inappropriate, illogical, unclear, or incomplete

 

Does not analyze the ethical issues that have a direct effect on the outcome of a financial audit

 

6

 

Internal Controls:

Events

[ACC-411-02]

 

Meets “Proficient” criteria and analysis demonstrates a keen understanding of the impact of current events of the company’s future risks and internal control

 

Analyzes current events for their impact on the company’s risk and internal control in the future and provides documentation of current events

 

Analyzes current events but does not discuss their impact on the

company’s risk or internal control in the future or does not provide documentation of current events, or the analysis is illogical, unclear, or incomplete

 

Does not analyze current events for their future impact on the

company’s risk or internal controls in the future

 

6

 

Critical Elements

 

Exemplary (100%)

 

Proficient (85%)

 

Needs Improvement (55%)

 

Not Evident (0%)

 

Value

 

Audit Program: Internal Control Components [ACC-411-02]

 

Meets “Proficient” criteria and demonstrates a sophisticated understanding of the process necessary to audit internal controls for cash

 

Writes an audit program that effectively and completely addresses all of the components of internal controls for cash including the control environment, risk assessment, control activities, information and communication, and monitoring

 

Writes an audit program for the internal control of cash, but the program is missing one or more required components, or is inappropriate, incomplete, or unclear

 

Does not write an audit program for the internal control of cash

 

6

 

Relationship: Evidence [ACC-411-01]

 

Meets “Proficient” criteria and demonstrates a sophisticated understanding of the role of evidence in an audit

 

Describes the audit data and evidence the team will review and explains why this proof is important

 

Describes the audit data and evidence the team will review but does not explain why the proof is important, the evidence is inappropriate, or the description is unclear, illogical, or incomplete

 

Does not describe the audit evidence data the team will review and why the proof is important

 

6

 

Relationship: Audit Universe

[ACC-411-02]

 

Meets “Proficient” criteria and demonstrates a sophisticated understanding of the risk that results from a significant portion of data being overseas and outside the audit universe

 

Analyzes how an audit team can compensate for risk that results when a significant portion of data is overseas and outside the audit universe

 

Analyzes how an audit team can compensate for risk that results when a significant portion of data is overseas and outside the audit universe, but the suggested method of compensation is inappropriate or the explanation is unclear or incomplete

 

Does not analyze how an audit team can compensate for the risk if a significant portion of the data is overseas and outside the audit universe

 

6

 

Relationship: Procedures [ACC-411-02]

 

Meets “proficient” criteria and demonstrates a sophisticated understanding of the relationship between the internal control evaluation and analytical procedures used for sampling

 

Describes the analytical procedures that will be used to determine the sampling program and how the internal control evaluation will affect this step

 

Describes the analytical procedures used to determine sampling but does not fully, accurately, or clearly explain how the internal control evaluation will impact this step, or the procedures for determining the sampling are inappropriate, incomplete, or unclear

 

Does not describe the analytical procedures that will be used to determine the sampling program or how the internal control evaluation will impact this step

 

6

 

Critical Elements

 

Exemplary (100%)

 

Proficient (85%)

 

Needs Improvement (55%)

 

Not Evident (0%)

 

Value

 

Relationship: Types of Evidence

[ACC-411-01]

 

Meets “Proficient” criteria and demonstrates a keen understanding of the use of evidence in an audit

 

Lists the types of evidence the audit team will request from the company

 

Lists the types of evidence the audit team will request from the company, but the evidence is inappropriate or the list is incomplete

 

Does not list the types of evidence the audit team will request from the company

 

6

 

Relationship: Considerations of Subjective Areas [ACC-411-02]

 

Meets “Proficient” criteria and demonstrates a keen understanding of appropriate considerations when auditing subjective areas

 

Describes considerations the team will make when auditing subjective areas, including any governing rules and regulations that will factor into audit decisions

 

Describes considerations the team will but does not explain how governing rules or regulations will factor into auditing decisions, or the considerations are inappropriate, incomplete, or unclear

 

Does not describe the considerations the team will make when auditing subjective areas or the governing rules and regulations that will factor into auditing decisions

 

6

 

Relationship: Factors for Planning Documentation

[ACC-411-01]

 

Meets “Proficient” criteria and demonstrates a sophisticated understanding of the purpose of audit documentation

 

Describes factors taken into consideration when planning the nature and extent of the audit documentation

 

Describes factors taken into consideration when planning the nature and extent of the audit documentation, but the factors are inappropriate or the description is incomplete or unclear

 

Does not describe the factors taken into consideration when planning the nature and extent of the audit documentation

 

6

 

Relationship: Responsibility for IT [ACC-411-03]

 

Metes “Proficient” criteria and demonstrates a sophisticated understanding of necessary IT risk coverage for the organization

 

Describes how IT risk coverage (computers, software, internet coverage, databases) is defined in the IT industry, whether the coverage is adequate, and how it addresses (or fails to address) the current and future risks posed by social media

 

Describes how IT risk coverage is defined in the IT industry but does not discuss whether it is adequate or how it addresses (or fails to address) the current and future risks posed by social media, or the description is inaccurate, unclear, or lacks detail

 

Does not describe how IT risk coverage is defined, whether it is adequate, or how it addresses or fails to address the current and future risks posed by social media

 

6

 

Critical Elements

 

Exemplary (100%)

 

Proficient (85%)

 

Needs Improvement (55%)

 

Not Evident (0%)

 

Value

 

Relationship: Internal Controls

[ACC-411-03]

 

Meets “Proficient” criteria and demonstrates a sophisticated understanding of internal controls put in place to protect computer data and proprietary information

 

Describes internal controls that are put in place specifically to protect computer data and proprietary information and how well they operate within the IT industry

 

Describes internal controls that are put in place specifically to protect computer data and proprietary information but does not discuss how they the operate within the IT industry, the assessment of the operation of controls is inaccurate, or the description is unclear or incomplete

 

Does not discuss internal controls specifically put in place to protect computer data and proprietary information or how well they operate within the IT industry

 

6

 

Relationship: Vulnerabilities [ACC-411-03]

 

Meets “Proficient” criteria and demonstrates sophisticated understanding of how to address IT vulnerabilities

 

Explains what current and future vulnerabilities exist for IT and how to address gaps

 

Explains what current and future vulnerabilities exist for IT but does not discuss how to address gaps, or recommendations for addressing gaps are unclear, inappropriate, or incomplete

 

Does not discuss current and future vulnerabilities for IT or how to address gaps

 

6

 

Articulation of Response

 

Submission is free of errors related to citations, grammar, spelling, syntax, and organization and is presented in a professional and easy-to-read format

 

Submission has no major errors related to citations, grammar, spelling, syntax, or organization

 

Submission has major errors related to citations, grammar, spelling, syntax, or organization that negatively impact readability and articulation of main ideas

 

Submission has critical errors related to citations, grammar, spelling, syntax, or organization that prevent understanding of ideas

 

10

 

Total

 

100%

 

 

 

 

 

 

 

 

 

Audit Program for Internal Control of Cash

Tyrell Van Nest

ACC-411

Southern New Hampshire University

11-21-2020

 

 

 

 

 

 

 

 

 

 

 

 

Audit program for internal control of cash

When deciding on audit procedures used for cash, the auditor should ensure proper clarity of internal control procedures to ascertain the groundwork to be covered. The auditor should also ensure the clarity of the existing organizational model of the client. Therefore, the auditing team needs to plan on how to test cash and cash equivalents to ensure that they cover the respective assertions of internal control components. (Louwers et al., 2018).

Control environment

An auditor should check if the cash balance at the financial statement exists at the date of the balance sheet or not. The auditor should ensure that bank statements issued by the bank have respective balances declared on companies’ financial statements or not. Therefore, the auditor should ensure all details stated regarding the cash are correct.

Risk assessment

The auditor should check if the cash balances comprise all cash transactions during the accounting period. All cash transactions in the company should be appropriately recorded and maintained. An example of a risk assessment measure by an auditor is confirming and checking whether the sales invoice is evidenced by debit transactions in the organization’s books (Frazer 2016).

Control activities.

The auditor should confirm the company’s declaration of cash on the reporting date. An auditor should also have sufficient evidence that the company owns a certain amount of cash. The company should not declare the cash or cash equivalents not received from clients.

Information and communication

The auditor should ensure the cash balances in financial statements are disclosed adequately with required and adequate disclosure made in accounting statements notes. All cash sources should be clearly disclosed and any other information relevant to stakeholders (Louwers et al., 2018). The cash and cash equivalents should be fragmented into cash at the bank and the other cash that the organization might own at the reporting date.

Monitoring

An auditor should confirm if the cash balances recorded actually indicates the fair underlying of economic cash value. The cash balance amount should be included as per equivalents of the company or prevailing value in the bank accounts. Also, the auditor should ensure the recorded cash balances are not overstated.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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