You are conducting the audit for A-One Travel. There are two major concerns you have with
A-One’s operations:
1. When a customer purchases a travel package via credit card, the accounting
department records a debit to accounts receivable and a credit to sales. However, if
the customer cancels the package, no entry is made at the time of cancellation. The
customer must request a refund in writing, and only then is the credit card refunded
and reverse entries made. As expected, customers call A-One Travel upset that their
credit card charges have not been reversed in a timely matter, as they were not
clearly made aware that refund requests must be made in writing. (This policy is
stated on the company website, but it is very difficult to find.)
2. As a result of this policy, some customers are never given refunds because they do
not submit a written refund request. Because no reversing entries were made, these
still appear as valid credit card sales on A-One’s books. You speak to A-One’s
president, who states that it is not their problem if wealthy clientele overlooks the
charge and are not concerned with getting their money back. They stick to the
company policy and do not offer “freebies.”
Checklist: In your analytical essay, address the following:
3. Because this is a situation you have never before encountered, you will need to
research significant deficiencies. Describe what significant deficiencies are and how
you think this situation applies.
4. Discuss your responsibility in informing the audit committee of this situation, if you
feel the need to inform them at all.
5. Should the company policy be addressed elsewhere as part of the audit? If so,
where, and how should it be explained?
6. Even though the A-One’s policy is completely legal, do you feel you have to discuss
it with A-One’s board to make the refund policy more ethical or at least more
transparent to customers?
7. How does this policy affect what you report as sales and accounts receivable on the
financial statements?
Critical Elements:
•
Write your original analytical essay in Standard American English. Please be sure to
include an introduction, body (addressing all the checklist items), and conclusion.
• Pay special attention to correct grammar, style, and mechanics.
• Respond to the checklist items in a complete manner.
• Ensure that your viewpoint and purpose are clearly stated.
• Demonstrate logical and appropriate transitions from one idea to another.
• Your paper should be highly organized, logical, and focused.
Respond in a minimum of a 2- to 3-page, APA-formatted, and citation-style paper. For
assistance in writing, visit the Writing Center and review common citations in APA
Unit 5 Assignment 2 Grading Rubric
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Formatting
Title Page
Citation
Outline
