Apollo Shoes: Payroll, Revenue, and Expenses

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Other information:

- Legal expense was confirmed directly in the attorney’s letter.

To confirm amounts and transactions from outside sources gives stronger validity to the confirmation. However, the attorney is paid by Apollo Shoes, another piece of audit evidence will help.

- Have they recorded our fee for the 2007 audit?

It looks as though the fee has not been recorded for the 2007 audit. It depends whether they are expensing as it incurs or when they are billed.

- With Apollo’s extensive use of e-mail now, I think postage and phone expenses are down from last year.

The expenses are down $23,774.76 for telephone and $50,229.60. It is amazing how much a company can save when switching to email. Utilities went up a little bit as well. Seems like a pretty big cut, we need to check if there are any other reasons why the costs would have come down.

- Has interest expense been accrued?

The interest expense is huge compared to the audited trial balance of 2006. We will to check the interest expense account entries to see what kind of interest and from what accounts.

Payroll Bridge working paper

Apollo Shoes, Inc.

Payroll Processing Controls

December 31, 2008

Strength / Weakness

Audit Application

Test of Controls

Compensating Substantive Procedures

S-1

Supervisor approval is indicated on timecard

This ensures that work was actually performed

Select a sample of timecards and examine for supervisor signature

S-2

Hiring of employees is approved by personnel department

This ensures that hiring is authorized and based on company policies

Using the S-1 sample, examine personnel file for approval

S-3

Supervisor examines labor distribution

Additional unauthorized payroll costs will not be charged to an operating department

Using the S-1 sample, examine labor distribution for supervisor initials

W-1

Payroll master file update summaries are not returned to Personnel Dept. for review

Errors in master file updates, which could result in incorrect payroll, will not be identified before processing

The information used in payroll calculations

After obtaining and reviewing the year-end payroll register and tie in the ending numbers to the trial balance the comparison to previous years reflects a reasonable and accurate results. Administrative salaries are $16,197,225,43 for the current year and $16,875,305.98 for the previous year and warehouse salaries are $4,720,715.56 for the current year and $4,633,383.82 for the previous year. When comparing and analyzing the salaries it reflects an increase of .96% in administrative salaries and 1% in warehouse salaries which is a reasonable change.

Salary Expense – Warehouse 108,939.59

Salary Expense – Admin 373,782.13

Accrued Salaries and Wages 369,523.47

Accrued Payroll Taxes 113,198.24

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