Sheridan AV Case Study 13

Sheridan Av Case Study 1
SHERIDAN AV CASE STUDY
By (Student’s Name)
Professor’s Name
College
Course
Date

Sheridan Av Case Study 2
Questions:
Sheridan AV is a new client of your firm and you were appointed as Audit Senior for Sheridan AV’s
audit for the financial year ended 31 March 2021. Perform the following tasks:
1. Identify a significant inherent risk at the industry and entity levels that could potentially increase the
risk of material misstatement in Sheridan AV’s financial statement. Name the accounts and
assertions, and the level of inherent risks in Working paper A1.
W/p ref: A1 Prepared by:
Date prepared:
Sheridan Audio Visual Limited Financial year ending 31 March 2021 Inherent Risk (IR)
Assessment
IR description
(2 x 2= 4 marks)
Accounts
(2 x 1 = 2 marks)
Assertions
(2 x 1 = 2 marks)
IR assessment
(likelihood &
materiality)
(2 x 2 = 4 marks)
1. Industry level Account receivable Valuation-risk of
valuation of obsolete
products
High and material
2. Entity level Sales Completeness High and material
(4 + 2 + 2 + 2 = 10 marks)

Sheridan Av Case Study 3
2. Assessing the control risks of Sheridan AV for the following assertions and write your conclusion in
the Working Paper A2.
W/p ref: A2 Prepared by:
Date prepared:
Sheridan Audio Visual Limited Financial year ending 31 March 2021 Control Risk (CR)
Assessment
Accounts / Assertions CR description
(8 x 2 = 16 marks)
CR assessment (likelihood
& materiality)
(8 x 2 = 16 marks)
1.Sales / Occurrences Lack of purchase order
authorization over some limits
High
2.Sales/ Completeness Lack of complete number of
invoices
High
3.Sales/ Accuracy Lack of approval for purchases by
management
Low
4.Accounts receivables/ Existence Missing sales receipts High
5.Accounts receivables/
Completeness
Missing data on receivable write-off High
6.Accounts receivables/ Valuation Wrong valuation of figures Low
7.Cash/Existence Entries of cash not for the current
period
Low
8.Cash/Completeness Missing cash transaction entries Low
(16 + 16 = 32 marks)

Sheridan Av Case Study 4
3. Identify TWO poor internal controls and propose TWO recommendations you would raise in the
management letter to David Sheridan. (16 marks)
1. There is no effective tracking system of maintaining a catalog of exactly what Sheridan AV
has and where it is because the business is still using the traditional methods of tracking without using
electronic inventories through either bad codes or RFID.
Recommendation: The organization should embrace electronic inventory tracking system using
RFID tags to keep close of all items. This will help ensure that every inventory location is numbered
correctly and inventory item is identified with such numbers. RFID will enhance inventory visibility by
giving real-time updates as well as faster inventory scanning (Ertugrul 2017). Having RFID readers in
place at every portal or even doorway will ensure that the Company exactly knows when the inventories
comes into or exit a location, unlike barcodes which can still help workers to potentially move items
without scanning hence eroding the accuracy of data (Glickman et al. 2015). Such an improved visibility
will further improve the returns or recalled items tracking by giving real-time updates as items re-enter the
warehouse and storerooms in Sheridan AV.
The RFID will significantly improve the stock tracking in the organization (Alwadi et al. 2017). This
is because it will not only lead to proper inventory control, it increases inventory security as well as quality
management. This is because it will allow Sheridan AV to identity all its individual products as well as
components, and subsequently track them effectively throughout the supply chain to point of sale from
production. The RFID tag is only a tiny microchip, with a small aerial, that will significantly help this
organization to contain a massive array of digital information regarding the specific item. Such tags are
effectively encapsulated in paper, plastic or even identical materials and fixed to product or the packaging,
to a container or pallet, or delivery van or truck (Payson et al. 2015.). This tag will be interrogated
effectively by the RFID reader thus transmitting and receiving the radio signals both to and from the tag.
Thus, Sheridan AV will have readers that can vary in sizes from a hand-held device to the portal via which