Analysis Of The Narrative And Observation Of Auditing Alchemy's Workplace

As focusing on each of the five management assertions for the inventory account, we discovered that there are some risky areas that indicate the need for further attention during the audit. First of all, for existence or occurrence, all items in the inventory account must physically exist and be available for sale. Thus, the auditors should physically count finished goods, copper rod, and plastic inventories, and determine actual increase of inventories at year end. Also, they should select items from the inventory ledger and locate them and reconcile the quantity. Second, for completeness, the auditors should make sure that all existing inventories have been recorded completely , go around the warehouse and ensure all the inventories are recorded in the inventory ledger. Third, for valuation or allocation, the auditors should make sure that Laramie Wire manufacturing sticks with one valuation method(For inventory items, valuation is based on the lower of cost or market value, with several alternative methods for calculating cost), find out if there is any scrap inventory that needs to be recorded and written off ,and ask about obsolescence items. Fourth, for rights and obligations, the auditor should ask them if there is any consigned inventory at their warehouse. If there is, those inventories should not be recorded in the company's inventory ledger. Finally, for presentation and disclosure, the auditors should review the company's financial

2) Just for Feet operated large, high-volume retail stores. Identify internal control risks common to such businesses. How should these risks affect the audit planning decisions for such a client?

In a virtual corporation environment, I believe the ABC method to be the most ideal for accurately tracking the costs involved in manufacturing, storing, delivery, and sales. For Super Bakery, Inc. the addition of multiple outsourced companies to their processes meets the criteria of products with manufacturing complexity that requires differing degrees of support services (Kimmel, Weygandt, & Kieso, 2009, p. 876). As a result, I agree with Super Bakery Inc.’s decision to implement an ABC system.

Inventory- when doing inventory in the field, at work, or even in your own home having accountability of your important or valuable things or information can be helpful.

In a virtual corporation environment, I believe the ABC method to be the most ideal for accurately tracking the costs involved in manufacturing, storing, delivery, and sales. For Super Bakery, Inc. the addition of multiple outsourced companies to their processes meets the criteria of products with manufacturing complexity that requires differing degrees of support services (Kimmel, Weygandt, & Kieso, 2009, p. 876). As a result, I agree with Super Bakery Inc.’s decision to implement an ABC system.

I don’t have an issue discontinuing the practice of doing monthly physical counts on 100% of the inventory and going to a random, cycle count procedure where small numbers of items are counting over time with a goal of cycling through the inventory quarterly. I would request that the managers provide documentation to Bill of the items counted, even if it doesn’t result in an inventory adjustment. This can be done in a quick email identifying the items counted each week and the results of those counts. The purpose would be to document the cycle count process as part of our internal control of inventory. Much like we do on the upholstery side, Bill could supply a summary of the items counted in a given time period and the results of those

The chances of failures can be decreased by executing the checks on the systems. These keep an eye on the systems preventing risks from occurring, and these checks are avoided as the interior controls. The motivation behind the inner controls is to keep the organization safe from risks associated with the modernized accounting-system risks. Organizations change their manual accounting systems to computerized accounting systems for different reasons, this incorporates the points of interest, and the explanation behind utilizing electronic accounting information is instinct. The organizations embrace the policies of their

Another risk for Laramie deals with the percentage of inventory it has on hand from 2008 to support the current amount of sales. Laramie’s inventory to sales percentage increased 16.4% from 2007 to 2008. Therefore, this increase shows either that Laramie has trouble keeping inventory accounts down or net sales are slowing relevant to the amount being produced. Also, the increase shows Laramie may have overstated inventories meaning there may be an existence issue. There is a need for further attention to the potential overstatement of inventories because the increase in inventory to sales shows that Laramie is not using its resources efficiently.

Having internal controls is one thing, but how the company evaluates that control is a matter all by itself. Being an independent auditor, it is our job to understand an entity and

Another aspect relevant to the information technology is the system-generated data and reports. If auditors choose a control that uses some information generated from the company’s internal IT system, the effectiveness of the control requires obtaining audit evidence of the accuracy and completeness of the internal information. In the ZOU’s case, when testing of the controls over risk #2, auditors use reports, which are automatically generated by the Warehouse K system. Auditors decide to further test the controls over accuracy and completeness. When testing the controls over risk #3, both monthly reporting package and budget information are somewhat generated internally by ZOU’s internal system. Depending on different systems, auditors decide to further test controls for accuracy and completeness with respect to the monthly reporting package, which is generated from PeopleSoft.

There are various procedures that could be taken in to account that would, if properly implemented, would have detected the frauds that occurred within the companies. There are many control risks that should have been taking regarding inventory along with preliminary audit strategies for the inventory and substantive test to be done that would have raised many flags during the typical audits as well as in depth ones.

In the early 1980 the consumer electronics industry was growing at an explosive pace. Between the 1981 and 1984 the total sales for the industry doubled. To support increasing sales massive amounts of inventory has to be procured, marked up and sold to consumers. Inventory becomes the biggest asset a retailer has. As part of the audit planning processes the inspection of the inventory system and verification of the actual inventory numbers should have been a priority. Crazy Eddie was able to inflate its financial results by fraudulently altering its inventory counts and was able to conceal these activities from the auditors for several years.

The following report relates to the internal controls of Woolworths, and will look to describe and analyse them with the use of flow charts. The report will then move onto give details of an audit program that has been designed to test the internal controls of Woolworth’s accounts payable. Moreover, possible ways of how controls could be overridden as well as how the overall system could be realistically improved will also be discussed within the report.

Recommendation: The Internal Auditor should report directly to the Audit Committee. This will ensure that the CEO will not be able to wield too much power over the Internal Auditor and will not be able to keep unfavorable findings from the Audit Committee. This will give the Audit Committee a clearer picture of the functioning of Alchemy.

Questions arise whether the company should centralize the 3 processes for the 3 divisions or each manager set up and control the processes of their products. Or perhaps, Annivom should change its organisational structure with a production manager to control the production of all its products and reverse the roles of its divisional managers to marketing & sales managers for its products. To coordinate the production and the marketing & sales, an appointment of operations director for snacks to overall in charge and coordinating production, sales, marketing and branding. Thus, the design, maintenance and interpretation of information about the business processes will become of considerable importance in effective management. The challenge for management accountants will be the primary providers of this information for strategic decisions. This is to ensure that through the use of process analysis and cost management technologies that appropriate information is available to support managers and employees at all levels and not just information from the divisional managers.