Auditing Case Study

NFJPIA Mid-Year Convention

Carolina Carts, Incorporated

Reyes Tacandong & Co. is a member firm of the RSM network. Each member of the RSM network is an independent firm each of which practices in its own right. The RSM network is not itself a separate legal entity of any description in any jurisdiction.
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Carolina Carts, Inc.
AUDIT OBJECTIVE:

To make a preliminary assessment of the control risk of the Company on the

revenue transaction cycle and internal controls of the Company and design
appropriate audit procedures/strategies in responds to the assessment

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Carolina Carts, Inc.
AUDIT OBJECTIVE

To make a preliminary assessment of the control risk of the Company on the

Revenue transaction cycle and internal controls of the Company and design
Appropriate Audit Procedures/Strategies in responds to the assessment

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Carolina Carts, Inc.
Requirement 1:

Identify controls that are in place in the revenue process of the Company. Indicate
the control objective each control achieves and for which assertion is the control
relevant?

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Carolina Carts, Inc.
Example:
Sales invoices are pre-numbered. The control objective is to ensure that all sales
invoices are accounted for. The control would be checking the sequence of sales
invoice numbers and not simply the fact the sales invoices are pre-numbered. The
control is relevant to the completeness assertion.

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Carolina Carts, Inc.
Requirement 2:
Identify tests of control you could perform to test each of the following control
objectives:

1. Shipments are not made to customers before the customer is approved for credit sales and
shipment is authorized.
2. Sales are not recognized before shipment or delivery to the customer.
3. Collections from customers are posted to their accounts on a timely basis.
4. Credit memos are not posted to customer accounts before they are authorized and approved.

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Carolina Carts, Inc.
Case Presentation Outline
1. Introduction
– Understanding of the Case
– Objectives
2. Presentation of controls
3. Procedures to be performed

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Thank You!