Express Courier Ltd is a limited liability company which operates as a prestigious, executive courier company. Its most recent financial statements are those for the year ended 31 March 2019. The directors of the company have developed a strong control environment in the company and introduced effective internal controls. These include the following:- Review of monthly management accounts at the finance committee meetings. The use of a non-current assets register. The establishment of an audit committee The company has 50 employees, of which 5 are senior executives and as part of their compensation packages the senior executives are assigned a fully maintained company vehicle. It is company policy to purchase only new cars and to replace them when they are three years old. The executives who are assigned vehicles, have first preference to purchase the replaced cars. They do so, by forwarding sealed bids to the company. If the senior executives who are assigned the vehicles do not exercise this option, the auction is then open to all members of staff. To protect the company from receiving only low bids from employees, sealed bids are also received from independent motor car dealers. The company has seen an increase in the demand for its services resulting from this. During the year ended 31 March 2019, the company purchased large quantities of office furniture, as part of an ongoing expansion programme. This included $500,000 of furniture which was ordered on 10 February but the company was not invoiced by 31 March 2019. The company’s accounting records show that the furniture was delivered on 31 March 2019 and that the associated supplier invoice was received on 31 May 2019, some two weeks after the company’s financial statements were presented for audit. Required: (a) State FOUR (4) objectives of the internal controls that the company could exercise over non-current assets. (b) With the implementation of the non-current asset register, explain how the company can use it to exercise control over its non-current assets (c) (i) Explain to the Board of Directors why it is essential for the organisation to have internal controls over the disposal of cars by Express Courier Ltd; It is essential for the Board of Directors to have internal controls over the disposal of cars by Express Courier Ltd because the cars should be properly maintained. (ii) Suggest FIVE (5) internal controls that Express Courier Ltd should employ over the disposal of cars.
Express Courier Ltd is a limited liability company which operates as a prestigious, executive courier company. Its most recent financial statements are those for the year ended
31 March 2019. The directors of the company have developed a strong control environment in the company and introduced effective internal controls.
These include the following:-
- Review of monthly
management accounts at the finance committee meetings. - The use of a non-current assets register.
- The establishment of an audit committee
The company has 50 employees, of which 5 are senior executives and as part of their compensation packages the senior executives are assigned a fully maintained company vehicle.
It is company policy to purchase only new cars and to replace them when they are three years old. The executives who are assigned vehicles, have first preference to purchase the replaced cars. They do so, by forwarding sealed bids to the company. If the senior executives who are assigned the vehicles do not exercise this option, the auction is then open to all members of staff. To protect the company from receiving only low bids from employees, sealed bids are also received from independent motor car dealers.
The company has seen an increase in the demand for its services resulting from this. During the year ended 31 March 2019, the company purchased large quantities of office furniture, as part of an ongoing expansion programme.
This included $500,000 of furniture which was ordered on 10 February but the company was not invoiced by 31 March 2019. The company’s accounting records show that the furniture was delivered on 31 March 2019 and that the associated supplier invoice was received on
31 May 2019, some two weeks after the company’s financial statements were presented for audit.
Required:
(a) State FOUR (4) objectives of the internal controls that the company could exercise over
non-current assets.
(b) With the implementation of the non-current asset register, explain how the company can use
it to exercise control over its non-current assets
(c) (i) Explain to the Board of Directors why it is essential for the organisation to have internal
controls over the disposal of cars by Express Courier Ltd;
It is essential for the Board of Directors to have internal controls over the disposal of cars by Express Courier Ltd because the cars should be properly maintained.
(ii) Suggest FIVE (5) internal controls that Express Courier Ltd should employ over the disposal
of cars.
(d) With regard to the delivery of office furniture to Express Courier Ltd on 31 March 2005:
(i) State how the transaction should be recorded in its accounting records of Express Courier
Ltd.;
(ii) Identify and briefly describe TWO (2) procedures the company’s auditors should carry out
to verify that the delivery occurred on that date.
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