create comprehensive work programs for the Inventory, Warehousing, and Payroll accounts and cycles.
Submit a 700- to 1,050-word document that includes the following: 

Audit steps for tests of controls, balances, transactions, analytical procedures, etc. as well as other considerations such as sample size and sample methodology.
A brief summary page should be included in this document, 525 to 700 words, for each of the work programs. Include in this summary specific financial information gleaned from the current Form 10-K used to perform an analysis of work program steps. For example, if the team noted significant swings in the Inventory balance year-over-year, identify these swings and how you address them in your work program (this is in essence an audit procedure – analytical review).
Introduction
The Following is a test of controls of the Nike company and one that also aims to shed light on
many other relevant factors including, transactions, balances and analytic procedures. It is essential to
begin by first of all, underlining how necessary a test of control is because it helps in analyzing the
efficiency of controls. This paper aims to expound on all the relevant procedures when making this audit
report while at the same time reflecting on any other appropriate optic.
Test of Controls
Cash:
In this case, a test is done to measure how the controls are molded even though there may be
variations in the quantity of the dollar of the primary corporate transaction. It is equally important to make
sure that the control is properly functioning as this helps in making sure that the dollar amount of
purchase does not have any impact on the goal (Accounting, Auditing and Accountability Journal, 2016).
Lastly, a review of the Nike Cash receipts is done to ensure all receipts are present.
Financial Instruments:
Most of not all financial instruments are characterized with a high risk that arises from the
complexity of what the company might be engaged in a past fiscal year or life for that matter. It is
because of these risks, that it becomes necessary to assess and do so extensively as this makes the same
risks lower and kept at an acceptable level. In this case, the controls to be reviewed would be Nike’s
investment strategy, a categorization of all financial instruments, how the transactions are recorded, and
lastly, how Nike establishes the optimum market value of these assets.
Sales:
The next elements of the test controls would be on sales and here, what will be tested is how
strong they are. To do so, a review of Nike’s sales invoices to ensure all invoices are present and none
skipped is done. At the same time, a review of the relevant purchase order authorizations is done as it
helps in shedding light on all the orders approved by management.
Receivables:
In this case, the primary test would be on what Nike does to get rid of embezzlements and vices
of this kind. To do so, controls above deadline and also those associated with the allowance for
uncollectible books are done. This is followed by a test for segregation of duty that helps in understanding
if any incoming customer payments are dealt with by separate individuals. A review of the authorization
of the credit memo will also be done.
Test of balances
Cash:
In this case, a demonstration will be done on all the primary bank reconciliation statements at the
time of the engagement. It is then followed by a gradual decrease in the quantity of reconciling entry,
which, to be precise, is derived from the statements of the preceding month. A trace is then conducted on
most of the reconciling entries, to cut off statements. Lastly, a confirmation of all accounts belonging to
Nike is done.
Financial Instruments:
The action to be taken in this case is straightforward and that is to begin by verifying what is
owned by Nike in terms of securities, the derivatives, hedge funds, and any other financial instruments.
This is coupled with a verification of the accounts they have and their overall value as well.
Sales:
In this case, a verification is done on the sales of services, and at the same time on the product
sales as this helps in the confirmation of the balances are correct from Nike’s statements.
Receivables:
In testing the receivables, a review of cash application to trace the collection of cash receipts to
client bills is done. This also helps in authenticating the correct cash use. Another review is to verify
whether the accounts receivable in the old balance is in synchronization with other relevant accounts as
well, and they all correspond to the general ledger.
Test of transactions
Cash:
All the thresholds are met in the financial statement of Nike. These range from being complete to
occurrence and cutoff on all cash businesses among many others deemed relevant. The valuation of
accuracy and various classifications related to the accounts portraying multiple transactions is also
mirrored upon. Lastly, the existence, disclosure, and presentation components are narrowed down on and
expounded on as well.
Financial Instruments:
Under this shade, we will need to conduct a review of the purchase and sales of any financial
instrument. At the same time, the consequent gains or losses for that matter incurred by Nike are mirrored
on for better understanding.
Sales:
Here, we review the individual Nike sales transactions. To do so, a verification is done on the
sales receipts as this helps in proving that the transactions are accurate (ICAEW, 2017). A review is also
done on the ledgers that back up the financial statement as this helps in bringing up certainty.
Receivables:
In this case, a review is done on the accounts receivable journal entries. To be precise, a review
will be done on all the relevant invoice packets to confirm if the billing staff accurately verified all
relevant information and used it to create the correct invoice.
Sample size
Cash:
For discounts not taken, an attribute sampling will be used. By so doing, issues such as
documents not approved, or the unchecked invoices will be done away with.
Financial Instruments:
Under this umbrella, a non-statistical approach will be used to determine sample size. A number
of factors will be deliberated upon including, control risks and the inherent risks among many others as
they will help in figuring out the needed sample size.
Sales:
In order to get the sample size, we will need to use the systematic sampling method. This will
involve the subtraction of the highest invoice from the lowest invoice. The result will be an invoice count
of the sales cycle for the audit period.
Receivables:
The sample size will be a factor and hence dependent on the results of the test of controls. In case
the internal controls are stable, then this will mean our sample size will be small and the opposite is true
for Nike’s case.
Sample methodology
Cash:
Here, a proportional sampling is suitable for Nike when the dollar amount of items is in
correspondence to the objective of a procedure, and to be precise, when the amount is significantly
varying.
Financial Instruments:
Since the financial instruments used by companies of Nike’s status can be prominent unlike
others, which can also be small, we will need to use proportional sampling. By so doing, it will be easier
for our samples to be sorted according to the size of the account.
Sales:
In this case, we will need to use the statistical stratified random sampling as our sampling
methodology and the justification behind this choice is the fact that it is the most successful approach for
this kind of audit (Westhausen, 2017). It will involve the assigning of random numbers to each sales
invoice coupled with using a random number generator to pick transactions hence making it easy to verify
the accuracy of transactions.
Receivables:
Here, we will make use of the same statistical stratified random sampling methodology where
random numbers will be assigned to each sales invoice. It will also involve the assigning of random
numbers to each sales invoice coupled with using a random number generator to pick transactions hence
making it easy to verify the accuracy of transactions.
Brief Summary
In this summary, a clear picture will be painted in all the audit programs discussed in the former
part of this paper. The first was on cash and it is essential to underline the fact that the cash structure of
Nike as a company was not only flawless but also commendable. A clear justification of this is the fact
that in the end, it manages to be competitive and a leading player in its market because of how well it
deals with its cash. The second program was on financial instruments. To be precise, Nike is endowed
with a number of securities that help in solidifying its financial base as a big-game player in its market.
Most importantly, it should be pointed out that the financial instruments belonging to this company were
equally commendable and free of any flaws that would be compromising to its own internal growth and
success for that matter. When looking at the sales for Nike as a company, it was however, evident that
there existed swings from year to year. A keen look into why this was the case and kept on happening, it
became apparent that this was due to various factors including market shifts, trends in the same market
and technological advancements as well. Through this deliberation, it was also easier to understand why
there may be future swings under the sales of this company. It is also important to underline the fact that
to address these wings in the work program, a market study will have to be conducted as it helps in
stabilizing the same swings and hence containing them in the grand scheme of things. Receivables, just
like it was the case for the first two controls, had no swings and therefore remained constant throughout
which is another commendable element for the Nik company. This is, therefore, a summary of the audit
controls belonging to the Nike company.
References
Accounting,
Auditing
and
Accountability
Journal.
(2016).
European
Accounting
Review.
https://doi.org/10.1080/09638180903162320
ICAEW. (2017). Materiality in the audit of financial statements. In Handbook of International Quality
Control, Auditing, Review, Other Assurance, and Related Services Pronouncements.
Westhausen, H. U. (2017). The escalating relevance of internal auditing as anti-fraud control. Journal of
Financial Crime. https://doi.org/10.1108/JFC-06-2016-0041

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