Memo
Subject: Audit Findings of Revenue Cycle Review and Revenue Cycle Test of Controls Audit #: 89771 Doc #: 104 Date: 1/25/2008 Re: Apollo Shoes, Inc. Engagement Partner - Arnold Anderson Engagement Manager - Darlene Wardlaw During the engagement and review of the Revenue Cycle of Apollo Shoes, Inc., the following processes were audited and non-compliances identified: Processes: 1. Revenue Cycle Test of Controls, For Year Ended 12/31/2007 ICC2 2. Receivables Aged Trial Balance, For Year Ended 12/31/2007 C2 Findings: 1. Revenue Cycle Test of Controls: 5 types of non-compliance issues were identified during the review process of the Revenue Cycle: No credit approval errors 31 instances Missing BL errors 3 instances Wrong pricing errors 12 instances resulted in an overcharge of $5,219. Arithmetic errors 2 instances resulted in an overcharge of $8,115. Wrong quantity errors 3 instances resulted in an overcharge of Receivable $630.
2.Accounts Aged Trial Balance Current: 47% 31-60 Days: 10% 61-90 Days: 14% 90+: 30% Comparing to organizations in same industry and similar in size, Apollo Shoes delinquencies in 30 and 60 day categories are below 15% are within normal rates. Of concern is the 30% delinquency rate in the 90+ category. The 90+ delinquency is majorly comprised by Mall-Warts, who has filed for bankruptcy. Conclusions: 51 recognizable deviations were discovered while analyzing the Revenue Cycle for 2007. Of major concern are the 31 deviations in the No Credit Approval area. Mall-Warts is a major customer, who is causing a high delinquency ratio in the 90+ category. From the observations, further research in other categories that have a direct impact by credit policies is recommended. Improvement in credit approval uniformity amongst all of Apollo Shoes clients is a necessity.
Sincerely,
John Audits, III Lead Auditor AOW