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Summary AC410 Unit 5 Assignment 2.docx Running head: SIGNIFICANT DEFICIENCIES IN ACCOUNTS RECEIVABLE AC-410 Auditing AC410 The audit of A-One Travel has revealed two major concerns relating to operations. The company ™s accounts receivable recognition and r $7.49   Add to cart

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Summary AC410 Unit 5 Assignment 2.docx Running head: SIGNIFICANT DEFICIENCIES IN ACCOUNTS RECEIVABLE AC-410 Auditing AC410 The audit of A-One Travel has revealed two major concerns relating to operations. The company ™s accounts receivable recognition and r

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AC410 Unit 5 Assignment Running head: SIGNIFICANT DEFICIENCIES IN ACCOUNTS RECEIVABLE AC-410 Auditing AC410 The audit of A-One Travel has revealed two major concerns relating to operations. The company ™s accounts receivable recognition and refund policy exhibit significant deficiencies in...

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  • April 29, 2021
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Running head: SIGNIFICANT DEFICIENCIES IN ACCOUNTS RECEIVABLE
AC-410

Auditing

AC410




The audit of A-One Travel has revealed two major concerns relating to operations.

The company’s accounts receivable recognition and refund policy exhibit significant

deficiencies in internal control. It is the responsibility of the auditor to report such

deficiencies to the audit committee. A-One’s company policy needs to be addressed

regarding valuation of assets and management’s ethical standards. Due to the level of risk of

misstatement of revenues, the refund policy must be discussed with the board in effort to

make it more ethical and transparent to customers. The company’s improper revenue

recognition affects the sales and accounts receivable balances reported on financial

statements. These issues are addressed during the course of the audit.

Whittington (2018) states, “A significant deficiency is a deficiency in internal control

over financial reporting (or combination of deficiencies) that is less severe than a material

weakness, yet important enough to merit attention by those responsible for oversight of the

company’s financial reporting”. One of the auditors’ objectives in the audit of receivables

and revenue is to establish the proper valuation of receivables and the accuracy of revenue

transactions. In this case, the specific objective for accounts receivable is that receivables are

presented at net realizable value. A-One debits accounts receivable and credits sales when a

customer purchases a travel package via credit card. Receivables are not properly recorded at

net realizable value and a deficiency in design is indicated as, when a customer cancels the

package, the sales returns and allowances account is not debited to adjust the sale for the

return.

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