Assignment on Lubna Auditing

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MAJAN UNIVERSITY COLLEGE

Added on 2020-04-21

Assignment on Lubna Auditing

MAJAN UNIVERSITY COLLEGE

Added on 2020-04-21

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Running head: LUBNA AUDITINGLubna auditingName of the studentName of the universityAuthor note

1LUBNA AUDITING Table of ContentsIntroduction................................................................................................................................2Part I...........................................................................................................................................2I.Identification and evaluation of deficiencies..................................................................2II.Recommendation to address the deficiencies..............................................................4III.Test of control..............................................................................................................5Part 2..........................................................................................................................................71.Substantive procedure for accruals and trade payables...................................................72.Software procedure for accruals and trade payables.......................................................83.Substantive procedure to obtain the audit evidence for year-end bank balance...........104.Substantive procedure for confirming the remuneration of the auditor........................11Conclusion................................................................................................................................12Reference..................................................................................................................................13

2LUBNA AUDITING Introduction The inventory management system is a procedure that is maintained with thecomputer software or manually that tracks the inventories. Physical counts of the inventoryare carried out for assuring that the inventory management system of the company is accurateand will assure that the items are not stolen or lost. Generally the detailed count for inventoryis taken before entering the amount in the balance sheet to assure that the entity reports thelevels of inventory for the company accurately. Part II.Identification and evaluation of deficienciesAll the count staffs were selected from the stores only – here in the given case, thecount staffs are responsible for the counting of inventories. Therefore, chances arethere that there may be temptation for hiding the missing inventories or the errors thatmay be removed by them illegally. Further, the count staffs will try to avoid countingthe bay where the errors are already known to them (Chandren, Nadarajan andAbdullah 2015). Count sheet not signed by staffs that were carrying out count procedure – non-signingmakes it tough for raising the queries with respect to the items that were counted asthe original staffs involved in the counting are unknown. Further, on account of anyissues one employee can blame another and the auditor will not be able to recognizethe actual employee in fault as no signature is there.The count sheets for the inventory count were not pre-numbered and were numberedat the time while using – chances are there that additional sheets for the inventorycould be lost which in turn will lost all the control on the sheets used at the time of

3LUBNA AUDITING counting the inventory. Further, as the sheets were not pre-numbered, loss of sheetswill not be traced. Further, if in the place of original sheet any other sheet is insertedthat deletes any name of the items that is already been stolen or misappropriated willnot be recognizable (Kalelkar and Khan 2016). Count teams were in the decision making place regarding which bays are to becounted – danger involved there with regard to the fact that the teams will omit theinventory under count or may count the same inventory twice owing to the lack ofclear instructions regarding where to count the inventories. Further, chances are therethat the count staff may put the figures against the items in the inventory sheetwithout even counting the items. If this happens, there will be no use of inventorycounting. Inventory sheets mentioned the item quantity for the items that are expected to find instore – It is obvious that the focus for the count teams will be more likely on findingthat item numbers that makes the inventory under counting. Further, they will stopfurther counting after exact numbers of items are found and will write the exactfigures against items even if there are any shortages (Knechel and Salterio 2016).II.Recommendation to address the deficiencies All the count staffs were selected from the stores only – count teams shall involvethe persons who are not involved in the inventory in any ways for providingindependence and honest counting. Further, if the counting staffs shall not havethe knowledge regarding where there is error and misappropriations so that thecounting can be performed in honest way. Count sheet not signed by staffs that were carrying out count procedure – all thesheets for counting actually involved in the inventory counting of individual itemsmust sign the sheets. Signing will minimize the error that may take place due to

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