AUDIT PLAN FOR BULLSEYE.

AUDIT PLAN FOR BULLSEYE.

LECTURER:

STUDENT NAME:

DATE:

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 AUDIT PLAN FOR BULLSEYE.

In order to conduct a substantial audit of Bullseye which is a general merchandise retailer with

hundreds of stores throughout the United States, there is need to obtain an in-depth

understanding of this entity together with its environment, which includes its internal control.

Establishing an understanding concerning the entity and its environment would provide guidance

to the auditor in various ways throughout the audit process, among them the establishment of

materiality, on considering appropriateness, and in the event of designing audit procedures which

can enhance the growth of Bullseye. This audit plan includes a description of the nature, the

timing, and the extent of all planned procedures for risk assessment. The audit plan also provides

significant impact on further audit procedures to be utilized by the auditor in bid to determine if

the financial statements are well stated basing on the US GAAP. The auditor will hence consider

audit risk in connection to individual account balances, the classes of transactions, as well as

disclosures and the necessary assertions concerning the overall level of financial statements.

Further audit procedures included in this plan include test of controls, the substantive tests of

transactions and the analytical procedures with the evidence amassed from the procedures that

are part of auditors sufficient and the appropriate evidence to support audit opinion and report

according to the US generally accepted auditing standards.

The general procedures as well as methodology to guide the designing of tests of controls and

the tests of transactions for all accounts to be audited will include; crafting an understanding of

the internal control over the particular cycle, carrying out an assessment of the planned control

risk for that particular cycle , and a determination of the extent to which controls will be tested

based on planned reliance on controls over the financial reporting for the account of audit

client, designing the tests of controls as well as substantive tests of all transactions for account to

enhance transactions-related audit goals and objectives. This would involve a determination of

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specific audit procedures that will be performed, sample size, the items to be selected and which

ought to be included in sample and the timing of the tests.

Inventory and warehousing Cycle

Test of controls.

A determination of the control procedures regarding the inventory and warehousing cycle of

Bullseye as well as the shortcomings in designing the test of controls will be made.

Substantive Tests of Transactions

This has to be made based on each of the audit objectives; on the occurrence, the completeness,

the accuracy, the posting and the summarization, as well as the classification and the timing. The

tests are used to analyze actual details that constitute various account balances as well as the

disclosures.

Analytical Procedures

AU 329 requires analytical procedures to be done in the planning phase of the audit and during

the overall review towards the end of the audit. They will serve to offer the auditor an additional

assurance; account is presented fairly and in accordance with the accepted principles of

accounting.

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Cash Cycle

Test of controls

For every identified internal control and the control deficiencies over the financial reporting of

cash, a number of tests of controls will be designed (Arens, Elder & Beasley, 2008, p. 453).

These tests will either used to assess the effectiveness of the design or operation of the control.

The approach to be used here will include: Inquiries of the appropriateness of the personnel (This

will include Local managers of all stores across USA, bookkeepers, all store managers, all

accountants and every individual tasked within Bullseye), The Inspection of relevant documents

and all reports; financial reports from all stores across US and from the corporate headquarters,

observation of how established controls are being applied, and the re-performance of control by

the auditor

Substantive tests of transactions

Substantive tests of transactions for cash will be linked to transaction-related audit objectives

that are identified in the test of controls. The tests are constructed to help the auditor determine

whether there exist any monetary misstatements for each objective in a cash transaction.

Analytical Procedure

This will involve a comparison of all the financial statements information to determine any

potential misstatement with that of the previous period. The test of controls and substantive tests

of transactions for cash receipts would be analyzed basing to Transaction-Related Audit

Objectives, the Key Existing Controls, the Test of Controls, the Deficiencies, and the Substantive

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Test of Transactions of Bullseye .This are adopted from test of controls and the substantive tests

of transactions formulated by Arens, Elder and Beasley for Hillsburg Hardware Co. (2008, p.

463).

All the recorded cash receipts are for funds received by Bullseye (occurrence). Accountant will

independently reconcile bank account; observe whether all accountants in charge effectively

reconcile the bank accounts. There will be a review of Bullseye cash receipts and master file for

any unusual transactions as well as amounts. There is also need to obtain prelisting of the cash

receipts as well as trace amounts on the cash receipts, testing from the names, the amounts and

the dates.

In order to carry out an intensive audit the following accounts will be given higher attention:

nominal accounts of the merchandise and real accounts. Nominal accounts have to do with

losses, gains, and income. In auditing these accounts considerations will be given to expenditure

on account of salaries; how are salaries and pay rolls prepared? Are they accurate in terms of

capturing the exact number of personnel or the correct salary expectations for each personnel?

Are figures inflated? Do payment dates correspond? Etc, accounts on interest received; what is

the value or income realized from all interests received? The accounts on loss on sale of asset;

how much loss was incurred on the sale of assets? And the profit on sale of asset account; what

gain was realized from sale of assets?

Real accounts has to do tangible aspects of Bullseye and comprises the cash accounts that

represent all tangible cash, the stock account representing tangible stock and the furniture

accounts which represents all tangible furniture of Bullseye. A determination of the effect of any

transaction on these accounts has to be made if the audit has to provide reliable information.

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The process of enhancing an independent quality audit can be faced by a number of ethical issues

as discussed below;

Impartiality. Walter and Dangol note that strong economic connections with the merchandise

may compromise the effectiveness of the audit. The desire of retaining business from Bullseye

may compromise the auditor’s judgment when crafting an evaluation of the quality control and

its management. There is hence the need of the auditors to be impartial in their working if this

process has to bring forth information that can enhance positive growth of Bullseye.

The lack of emphasis on standards may also interfere with the auditing process. Despite being a

professional and hard working auditor, failure of the CPA firm from which I am part off, to

emphasize the enforcement of auditing standards may impact on the integrity of the audit

process; poor management of the quality control may go unnoticed. Lack of special attention to

auditing reports by the firm may further more make the auditors to be non committal in

enhancing effective auditing process.

Denying access to premises may also impact on the ethical standards of the audit in that it leads

to incomplete audit. Thwarting an audit by hiding unsafe practices is unethical. Auditors may

also face intimidation when the company decides to emphasize the political or any other power

in its possession and its ability to effectively bargain with auditing officials on their quality

control measures.

Lack of education in ethical issues may as well impact on the quality of the auditing process.

There is need for both the auditing officers and the involved Company officials to have clear

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knowledge regarding the standards of the audit, ethical auditing practices and the general

expectations regarding the cooperation of the management.

In ending the above audit objectives and the test transactions, the above procedures must be well

revised basing on actual audit plan and the program which will be designed for Bullseye. The

report of this audit should be well published and should be explained to all those that are tasked

with various responsibilities within Bullseye. Explanations of the results are vital in order to

effect any managerial changes and propel the growth of Bullseye.

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References

Arens, A., Elder, R. & Beasley, M. (2008). Auditing and Assurance Services: An Integrated

Approach (12th ed). New York: Pearson Education.

Louwers,T.J., & Reynolds, J.K. (2002 ). Apollo shoes casebook. New York: McGraw-Hill.