Apollo Shoes is a company that manufactures and sells footwear. The company recently underwent an audit by the accounting firm of Denny, Moch, and Reed. As part of the audit process, the accounting firm reviewed various aspects of Apollo Shoes' financial statements and business operations in order to assess the accuracy and completeness of the company's financial records.
One of the key areas of focus for the audit was the company's inventory management. Inventories are a significant asset for most companies, and it is important for them to be accurately valued in order to properly reflect the financial position of the company. In the case of Apollo Shoes, the audit revealed that there were several issues with the company's inventory management.
First, the audit found that the company was not properly keeping track of its inventory levels. The company was using an outdated system for tracking inventory, which resulted in incorrect counts and overstatements of inventory values. This could lead to overstating the value of the company's assets and potentially misleading investors and other stakeholders about the financial health of the company.
Second, the audit also identified instances of "shrinkage" in the company's inventory. Shrinkage is the term used to describe the loss of inventory due to theft, damage, or other factors. In the case of Apollo Shoes, the audit found that the company had a significant amount of shrinkage, which had not been properly accounted for in the company's financial records. This could also lead to overstating the value of the company's inventory and potentially misleading investors and other stakeholders about the financial health of the company.
Overall, the audit of Apollo Shoes identified several issues with the company's inventory management. These issues could potentially have significant impacts on the accuracy and completeness of the company's financial statements, and it is important for the company to address these issues in order to improve its financial reporting practices. Some steps that the company could take to address these issues might include implementing a more accurate and up-to-date inventory tracking system, improving controls to reduce shrinkage, and properly accounting for shrinkage in the company's financial records. By taking these steps, Apollo Shoes can improve the accuracy and reliability of its financial statements and better inform investors and other stakeholders about the financial health of the company.