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Summary AC410 Unit 5 Assignment 2.docx Running head: SIGNIFICANT DEFICIENCIES IN ACCOUNTS RECEIVABLE AC-410 Auditing AC410 The audit of A-One Travel has revealed two major concerns relating to operations. The company ™s accounts receivable recognition and r$7.49
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Summary AC410 Unit 5 Assignment 2.docx Running head: SIGNIFICANT DEFICIENCIES IN ACCOUNTS RECEIVABLE AC-410 Auditing AC410 The audit of A-One Travel has revealed two major concerns relating to operations. The company ™s accounts receivable recognition and r
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AC410 Unit 5 Assignment Running head: SIGNIFICANT DEFICIENCIES IN ACCOUNTS RECEIVABLE AC-410 Auditing AC410 The audit of A-One Travel has revealed two major concerns relating to operations. The company ™s accounts receivable recognition and refund policy exhibit significant deficiencies in...
ac410 unit 5 assignment 2docx running head significant deficiencies in accounts receivable ac 410 auditing ac410 the audit of a one travel has revealed two major concerns relating to operation
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Running head: SIGNIFICANT DEFICIENCIES IN ACCOUNTS RECEIVABLE
AC-410
Auditing
AC410
The audit of A-One Travel has revealed two major concerns relating to operations.
The company’s accounts receivable recognition and refund policy exhibit significant
deficiencies in internal control. It is the responsibility of the auditor to report such
deficiencies to the audit committee. A-One’s company policy needs to be addressed
regarding valuation of assets and management’s ethical standards. Due to the level of risk of
misstatement of revenues, the refund policy must be discussed with the board in effort to
make it more ethical and transparent to customers. The company’s improper revenue
recognition affects the sales and accounts receivable balances reported on financial
statements. These issues are addressed during the course of the audit.
Whittington (2018) states, “A significant deficiency is a deficiency in internal control
over financial reporting (or combination of deficiencies) that is less severe than a material
weakness, yet important enough to merit attention by those responsible for oversight of the
company’s financial reporting”. One of the auditors’ objectives in the audit of receivables
and revenue is to establish the proper valuation of receivables and the accuracy of revenue
transactions. In this case, the specific objective for accounts receivable is that receivables are
presented at net realizable value. A-One debits accounts receivable and credits sales when a
customer purchases a travel package via credit card. Receivables are not properly recorded at
net realizable value and a deficiency in design is indicated as, when a customer cancels the
package, the sales returns and allowances account is not debited to adjust the sale for the
return.
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