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ACT504 Audit and Assurance Services Assignment

   

Added on  2019-11-12

6 Pages996 Words434 Views
Running head: AUDITING AND ASSURANCE SERVICESAuditing and assurance servicesName of the UniversityName of the studentAuthors note

1AUDITING AND ASSURANCE SERVICESPart C:Requirement a:Five deficiencies that can be identified in the internal control of Toy Universe PtyLimited are as follows:Lack of adequate documentationThe evidence of underlying transactions is provided by the documentation that helpsin the appropriate establishment of financial statements of business (Louwers et al. 2016).Goods delivered by TUPL to customers and the record of the goods sold are not forwarded tothe despatch department. Furthermore, records of signature of customers as a proof thatgoods have been received are not recorded by couriers. Lack of authorizationIt is essential for business to introduce the level of authority that would help ineliminating the risk of improper recording of sales and purchase made. There is noreconciliation of suppliers’ statement resulting from change in purchase ledger department(Arens et al. 2016). Supervisor and purchase ledger clerks both can record the detail ofsupplier in purchase ledger master file.Lack of separation of dutiesSmall business is subjected to frauds as they have few employees performing multipleroles. Internal control of organization becomes effective when the duties of properly assignedto individual. The process of credit checks and credit limit provided to customers are notchecked by either sales manager or sales director.Inadequate control over the safeguarding of assets

2AUDITING AND ASSURANCE SERVICESLack of control in safeguarding of assets is another deficiencies faced byorganization. Purchasing of equipment has led to surplus of assets that is more thanrequirement of business. Management of TUPL has not done anything to reduce the surplusof old equipment.No review or oversight of level of inventoryBasic review procedures are sometimes not performed by business such as TUPL.The inventory systems are not integrated with the website of organization and at the timeplacing the orders, levels of inventories are not checked (Simnett et al. 2016).The identified deficiencies in internal control of TUPL would weakness the internalcontrol system and there arises the risk of material misstating the financial statements.Organization would fail to reconcile significant accounts that lead to improper presentation iffinancials of business.Requirement b:The deficiency of internal control in segregation of duties between supervisors andpurchase ledger clerks can be controlled by making enquiries and observing the performanceof various duties and functions. Deficiencies relating to improper documentation can becontrolled by selecting sales invoices sample and examine them for second person review(William et al. 2013). TUPL should segregate duties regarding custody for inventories andover purchases of assets. The credit limits provided to customers and credit checks givenshould be performed by sales director. It is required by organization to properly authorize thecredit limit granted, inventory level. Details of supervisors and recording of raw materialsdetails should be done separately by separate levels of authority. Furthermore there needs tobe review of clerical accuracy of sales invoices entered by second person.

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