Weaknesses in the Existing System of Jertsy Ltd and Recommendations

Contents
In response to Q1....................................................................................................... 2
WEAKNESS IN THE EXISTING SYSTEM-....................................................................3
Overstocking-....................................................................................................... 3
Recommendation-................................................................................................ 3
Procedures-.......................................................................................................... 3
Recommendation-................................................................................................ 3
Segregation of Duties-......................................................................................... 4
Recommendation-................................................................................................ 4
Security and Storage arrangements-...................................................................4
Recommendation-................................................................................................ 4
Disaster recovery or Contingency Arrangements-...............................................5
Recommendation-................................................................................................ 5
Insurance Arrangements-..................................................................................... 5
Recommendation-................................................................................................ 5
Stock Records-..................................................................................................... 5
Recommendation-................................................................................................ 6
Staff Training-...................................................................................................... 6
Recommendation-................................................................................................ 6
Inventories-.......................................................................................................... 7
Recommendation-................................................................................................ 7
Stock Levels-........................................................................................................ 7
Recommendation-................................................................................................ 7
Conclusion-.............................................................................................................. 7
In response to Q2....................................................................................................... 9
Audit Assertions to be considered-..........................................................................9
Assertions followed-........................................................................................... 10
Substantive Procedures followed-.........................................................................11
Conclusion:............................................................................................................ 14
References:.............................................................................................................. 16

In response to Q1.
“Jertsy Ltd owns a range of fashion clothing stores in Australian state capitals. Each
store manager operates with a degree of autonomy with regard to the types and
quantities of clothes that they buy and sell. Head office has established a standard
mark-up on cost that local managers must use to arrive at selling prices. Store staff
tends to be younger people who work part time and move on after a year or two; as
a result, there is a significant staff turnover. This high staff turnover does not affect

trade and business is booming having tapped into youth fashion. Each store
maintains its own accounting records and returns are sent to head office reporting
purchases, sales and any sundry expenditure incurred locally. These monthly
returns are consolidated by the accountant who prepares monthly management
reports. The recent success of the business has allowed senior management to
adopt a strategy of growth by opening new stores, but they are worried about
maintaining control as the business expands.”
WEAKNESS IN THE EXISTING SYSTEM-
Overstocking-Impoverished inventory control procedures throughout the
company are likely to result in overstocking in certain places-resulting in
inventory that will ultimately be discounted for sale. At the very same
moment, inventory-outs are probable to result in loss of sales in others
(Yourbusiness.azcentral.com, 2019).
Recommendation- Every other fresh accounting system should include an
acquisition scheme that enables stock levels to be understood around the
shop spectrum, enabling the transition of unsold inventory to shops that
need it. This should also decrease inventory-out occurrence. Without a key
buying offi ce, the company is expected to lose out on rebates that could be
accessible for large purchases. It may not be possible to maximize certain
conditions like billing intervals and shipping moments. A buying scheme in
which regional executives position applications for purchases at
headquarters where a buying unit puts commands with authorized providers
with whom contracts are in spot should enhance this method.
Procedures- The store manager of each store has been given freedom to
run the store according to his will. While this is an excellent idea, it often
ends in less desired outcomes in the long run. The store managers can have
their own respective self-interest which may not be good for business. Store
managers can often lead the staff s in a wrong way without thinking about
ethics which may hamper the functioning of staff s and that may lead to
negative results.
Recommendation- There should be regular inspection of working ethics in
each store to keep the store managers in check and for proper and free
functioning of staff (WiseStep, 2019). A department should be set up where a