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Summary ACC 492 WK 2 Team Assignment Group 3.docx Running head: Auditing Cash Financial Instruments, Sales and Receivables Accounts ACC/492 Auditing Cash, Financial Instruments, Sales and Receivables Accounts University of Phoenix ACC/492 Auditing Cas $7.49   Add to cart
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Summary ACC 492 WK 2 Team Assignment Group 3.docx Running head: Auditing Cash Financial Instruments, Sales and Receivables Accounts ACC/492 Auditing Cash, Financial Instruments, Sales and Receivables Accounts University of Phoenix ACC/492 Auditing Cas
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ACC 492 WK 2 Team Assignment Group Running head: Auditing Cash Financial Instruments, Sales and Receivables Accounts ACC/492 Auditing Cash, Financial Instruments, Sales and Receivables Accounts University of Phoenix ACC/492 Auditing Cash, Financial Instruments, Sales and Receivables Ac...

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  • July 3, 2021
  • 7
  • 2020/2021
  • Summary

Subjects

  • financial instruments
  • sales and receivables a
  • acc 492 wk 2 team assignment group 3docx running head auditing cash financial instruments
  • sales and receivables accounts acc492 auditing cash

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  • Rasmussen College
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Running head: Auditing Cash Financial Instruments, Sales and Receivables Accounts

ACC/492

Auditing Cash, Financial Instruments, Sales and Receivables Accounts

University of Phoenix

ACC/492


Auditing Cash, Financial Instruments, Sales and Receivables Accounts

Introduction

Amazon is one of the world's most innovative companies. It was founded in 1994 and

is now a multibillion-dollar organization. Amazon strives to be "Earth’s most customer-centric

company.” The company owns many subsidiaries including Whole Foods Market, Kindle, Fire

TV, and Alexa. The company’s main goals are to focus on selection, price, and convenience

for consumers to give them the best services and prices. (Amazon, 2020)

In the following, we will discuss specific risks about Amazon when conducting an audit

for cash, financial instruments, sales and receivable accounts. We will include audit steps of

tests of controls, tests of details of balances, substantive tests of transactions, analytical

procedures, sample size, and sample methodology. This will give a better understanding of what

auditors

look at during an audit and how the company runs in everyday sales.

Tests of Controls

Tests of controls are used in Amazon’s audit procedures to evaluate the

company’s internal controls. The purpose of tests of controls is to determine whether internal

controls are sufficient to detect or prevent risks of material misstatements. The auditor may use

one or more tests of controls to determine the effectiveness. The nature of the test of control

comes from the nature of the control (Arens, Elder, Beasley, & Hogan, 2017) A healthy internal

control system is essential for a business to keep financial records accurate, and Amazon’s

internal controls are reliable and perform successfully. (Amazon, 2020)

, The cash account is affected by all cycles but inventory and warehousing. Cash

is important because if the company is not bringing in sales then they cannot pay their vendors

or bills. Therefore, a number of transactions affect the cash account. The appropriate tests of


controls must be performed by the auditor in order to determine if internal controls are

performing successfully. (Arens, Elder, Beasley, & Hogan, 2017) For example, auditors may

review the bank reconciliation for evidence to make sure they have been done by an appropriate

person and signed off correctly.

Financial instruments include investments such as debt and equity securities,

derivative instruments, or hedging activities. An auditor must gather appropriate evidence to

determine if the financial account is properly in accordance with the audit objectives. Test of

controls for financial instruments may not be necessary to reduce audit risks. (Arens, Elder,

Beasley, & Hogan, 2017)

For sales and receivable accounts, the auditor must understand controls over

balances and presentations relating to the audit of financial statements and internal controls over

financial reporting. A common test of control for sales is the auditoring checking for number

sequences in documents. The auditor will look for omitted numbers or duplicate numbers in the

sales journal if reviewing invoices. (Arens, Elder, Beasley, & Hogan, 2017)

Tests of Details of Balances

A test of balances is used to verify that no material misstatements exist in the balances of

the financial statements. A test of details is where you dig deeper into the details of the

transactions. A few examples of a test of details are vouching invoices, trace bills sent to

customers, sending bank confirmations, reconciling payroll in the general ledger to Quartey

payroll tax returns. (Substantive, 2021) When performing an audit, we need to look at the Nature

of Evidence if

An auditor believes a receivable might be overstated they may send confirmation to the

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