Auditing and Control in Jertsy Ltd and Sweet Sound Ltd

Running head: AUDITING AND CONTROL IN JERTSY LTD AND SWEET SOUND LTD
AUDITING AND CONTROL IN JERTSY LTD AND SWEET SOUND LTD
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AUDITING AND CONTROL IN JERTSY LTD AND SWEET SOUND LTD1
Table of Contents
Introduction................................................................................................................................2
Jertsy Ltd....................................................................................................................................2
Weakness in the existing system............................................................................................3
Improvements that should be included..................................................................................5
Sweet Sound Ltd........................................................................................................................7
Main Audit assertions............................................................................................................7
Substantive procedure for assertions......................................................................................8
Risks in auditing provision for warranty..............................................................................10
Recommendations....................................................................................................................11
Recommendation for Jertsy Ltd...........................................................................................11
Recommendation for Sweet Sound Ltd...............................................................................11
Conclusion................................................................................................................................11
References................................................................................................................................13

AUDITING AND CONTROL IN JERTSY LTD AND SWEET SOUND LTD2
Introduction
The report titled “Auditing and Control in Jertsy Ltd and Sweet Sound Ltd” is
prepared to analyse the case study of both the stated company in the auditing point of view.
The Jertsy Ltd is fashion clothing company of Australia. The firm owns the range of fashion
clothing stores in the capitals of Australian States. The each store of the firm operates with a
degree of autonomy with regard to the types and quantities of clothes that they buy and sell.
While, the Sweet Sound Ltd is also an Australian based firm which operate in the electronic
sound systems. The firm is known for its mini hi – fi systems.
The senior management of Jertsy limited observe the recent success in the operations
of the firm and adopted a strategy of growth by opening the new store along with the they are
worried that maintaining controls as the business expands. Hence, the report is prepared to
analyse the business and to determine the weaknesses present in the existing system of the
firm. Further, the report also suggests improvements that should be included in any system
that senior management can choose to introduce. On the other hand, the Sweet Sound Ltd
decided to increase the warranty on its product from three years to five years. In this part the
report identifies the main audit assertions for the successful audit of the firm. Further, the
report also describes the types of the substantive procedures to cover the identified assertions.
The report also discuss the special risks in auditing provisions for warranty. Lastly, in the
basis of the above analysis of the business and other relevant information, this report draw the
conclusion for the case of both the firm and provide the appropriate as well as effective
conclusion to both the firm.
Jertsy Ltd
Jertsy Ltd is an Australian fashion clothing firm. The firm has several store in the
Australian state capitals. Every store manager operates the store autonomously along with the

AUDITING AND CONTROL IN JERTSY LTD AND SWEET SOUND LTD3
regards of the quantities of clothes that they buy and sell. The head office provides the
standards mark – up of the cost which is followed by the each manager to determine the
selling price of the products. The staff turnover in the firm is significant as the most of the
employees of the firm is young and work part time and leave the job within one or two years.
The accounting records are maintain by the stores itself which is send to the head office of
the firm to report the purchase, sales and other sundry expenses. The Jertsy Ltd reported a
success in the recent time which motivates the management of the firm to adopt a new
strategy for the growth of the firm by opening the new store. This new expansion of the
business also make the management of the firm worry of the control as the business of the
firm expands.
Weakness in the existing system
Though, the business reported success in the recent time, the existing system of the
Jertsy Ltd have various issue that can affect the business operation of the firm or the
profitability of the firm. Some of those weakness are followed: -
 Does not able to attract many customers
This type of business system also focus in the single product and become fail to attract
more customers. Jertsy Ltd also operates only with the fashion clothing and deals only with
those customers who are looking for the clothing (Bumgarner and Vasarhelyi 2018). This is
one of the major weakness of this system that this system fails to attract more customers and
only work with the limited customers. This also limit the profitability of the firm as firm does
not have any alternative sources of generating the profit.
 Difficult to perform control over a number of retail outlets
In this type of business system in which Jertsy Ltd operates found the difficulties to
perform its control in the retail stores. As per the provided case study, Jertsy Ltd have a range