To: Board of Directors

RE: Audit report

Findings Title: Cut-Off dates

Findings Description:

It has come to the attention of the auditors while using Cut-Off test that J Marketing’s
sales for the 2nd quarter included sales from the previous quarter and operated on
weekends. Attached are the working papers for the said findings. (Findings 1 and
Findings 4)

Root-Cause Analysis:

• Because the company wants to have greater sales to attract investors.

Why

• Because their system may not have controls in terms of dates and have to be
Why typed manually.

• the accountant may not be keen with details that would lead overlooking
Why the transactions.

• The sales transaction recording was not done according to policy.

Why

• Because they have poor system control in sales cut-off.

Why

Recommendation:

J Marketing should create a stronger system that would not record transaction
beyond or prior the reporting date to be presented. The accounting system should
possess cut-off detection feature or at least connected to standard time that cannot
be forged. With this recommendation, it would lessen the risk of financial
misstatements due to cut-off dates.
To: Board of Directors
RE: Audit report

Findings Title: Invoice Gap

Findings Description:

It has come to the attention of the auditors while using Gap analysis that J
Marketing’s sales invoice have gap in invoice number. See attached file (Findings 3).

Root-Cause Analysis:

• Because there might be gap when printing the invoices.

Why

• Accounting Software error.

Why

• Employee negligence of encoding the sales invoice into the

Why system.

• Employee/s intent to remove transaction to fraudulent

Why transaction.

• Manual input of number sequence.

Why

Recommendation:

J Marketing should be careful in handling numbered invoices. They should check if

the invoices are all recorded in sequence. The company accounting system should
detect redundant and skipped invoices. Automatic number sequence that cannot be
edited but can be cancelled.
To: Board of Directors
RE: Audit report

Findings Title: Re-Computation

Findings Description:

It has come to the attention of the auditors while having re-computation regarding the
gross sales J Marketing have variances from the amount per audit. See attached file
(Findings 2).

Root-Cause Analysis:

• Intentional miscomputation to lessen tax obligation

Why

• System error
Why

• Inaccurate computation.
Why

• Employee error.
Why

• Manual computation.
Why

Recommendation:

J Marketing should check if they have accurate computation every now and then
(double check) because this might lead to under/overstatement of sales due to error
in computation of total gross sales. They should reconcile between the hardcopy and
the system interpretation of the details encoded.
To: Board of Directors
RE: Audit report

Findings Title: Overdue Accounts

Findings Description:

It has come to the attention of the auditors while checking overdue accounts J
Marketing have accounts that were beyond their term that cost materially. See
attached file (Findings 1 – AR Audit).

Root-Cause Analysis:

• Inability to follow the terms indicated in the invoice.

Why

• Customer accounts were not check every now and then or at least per term.
Why

• Familiarity threat
Why

• Employee negligence.
Why

• Lack of accounts control in credit terms

Why

Recommendation:

J Marketing should check the customer’s invoices per term in order to update their
payable to the company. If possible, accounting system should alert the authorized
personnel if some accounts are overdue. Also, company should give notice to each
credit customer prior to their due.
To: Board of Directors
RE: Audit report

Findings Title: Beyond Credit Limit

Findings Description:

It has come to the attention of the auditors while checking credit accounts J
Marketing have accounts that were beyond their credit limit that cost materially. See
attached file (Findings 2 and AR Summary).

Root-Cause Analysis:

As per the policy given, there were transaction that were beyond credit limit because
there are customers that were given credit even if they still have outstanding
balance. Credit limits were not checked every credit transaction per customer.

Recommendation:

J Marketing should check the customer’s credit limit before allowing them to take
credit again. If possible, accounting system should alert the authorized personnel if a
company still have account balance.
J MARKETING: SALES, ACCOUNTS RECEIVABLE, INVENTORY, PAYROLL
AUDIT USING MS EXCEL

(palihog ko insert dang sa logo)

Presented to the Faculty of the Department of Accounting Education

UM Digos College
Roxas Ext., Digos City

In Partial fulfilment of the Requirements for the Subject

COMPED 421

By

SARDIDO, KING MARK LESTER B.

LONZAGA, ESTELLA TERESITA
QUISAOT, MERRY GRACE

AUGUST 2019