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Auditing and Assurance - case study paper writing service

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Auditing and Assurance – case study paper writing service

Case study

APIO OLAYIWOLA CHEN (AOC) PLC

 

AOC Plc is a manufacturing company, buying raw materials and other essentials from approximately 600 suppliers. Your audit junior has recorded the company’s purchase system as follows:

 

Orders are generated by the company’s computer, which is programmed to react when minimum inventory holding levels are reached. These levels are pre-determined by the company’s management team. Orders are produced when inventory levels reach what is equal to three days stock availability.

 

Each order names the previous supplier and quantity required of any particular inventory line. They also note the previous price paid for each product. The pre-printed orders are reviewed by the Purchasing Director, signed and forwarded to the relevant supplier.

 

All deliveries of items purchase are directed to the goods received bay, where a three part computer input document (GRN) is completed, detailing supplier, item delivered and number of units purchased. This is used as a computer input document to update the inventory recoding system, and is eventually filed in the Purchasing Director’s office. Any documentation that is received with a delivery is kept in the goods received bay for six months and is then destroyed.

 

The second copy of the GRN is passed on to the invoice section showing that the inventory has been received intact. The third copy is filed in the goods received bay. The invoice, on receipt, is sent to the office junior clerk in the invoices section, where it is matched with the GRN. If the delivery details agree to the invoice details, the invoice is stamped “approved”, and the GRN is destroyed. The office junior files the approved invoices until the end of the week in the top drawer of his desk and then passes them onto the accounts clerk. If an invoice can’t be matched to a GRN, the junior clerk checks against the computer records to ensure that an order has been generate by the computer. If this is the case, then the invoice is authorized in the normal way.

 

The invoices are listed, totaled, posted to the purchase ledger and filed in supplier order by the accounts clerk. The invoice list is used as a basis for raising cheques for the eventual payment of suppliers.

 

 

 

Required:

Assume you are the audit senior on the audit of AOC plc, write a report to document the system before the commencement of the audit. Your report should address the following:

 

  1. Define Internal Controls and discuss management’s responsibilities with regards to the Internal System of a company. (30 marks)

 

  1. List the weakness in the system, explaining the possible effect on the financial records of the company if the system is allowed to function in its present state. (30 marks)

 

  1. Identify and discuss appropriate recommendations to improve the control environment and the procedures in the Purchases Systems. (30 marks)

 

 

NOTE:

In writing your report, you need to make reference to the relevant International Standards on Auditing (ISAs), where applicable.

 

10 marks are available for report structure and writing style.

 

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