Flowchart Purchasing Process-Identification of Controls & Weaknesses – Wood Manu
ID: 2454102 • Letter: F
Question
Flowchart Purchasing Process-Identification of Controls & Weaknesses – Wood Manufacturing
Identify the Controls and Weaknesses in the accompanying flowchart (Purchases/Payables/Payments) completing the template attached. Indicate the importance of the control or severity of any weaknesses and how you would test the controls or overcome the weaknesses that you identify in the flowchart for your audit: List any and all ASSUMPTIONS (if any) you may have below: (assumptions should be logical given the scenarios presented).
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Assumptions (if any)
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Controls
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A Concise Description of the Control Identified Indicating the Design Characteristic that will be tested (the Implementation of Functioning)
Importance of the Control to the Audit
How the Control will be Tested During the Current Audit
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Weaknesses
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A Concise Description of the Weakness Identified Indicating the Absence of Appropriate Design Characteristic or Implementation Issue Causing Potential Risk)
Your Assessment as a Deficiency/
Sign Deficiency/ or
Material Weakness
How the Weakness Impacts the Audit and How You Will Overcome the Weakness(es) During Your Audit so that A Clean Opinion May be Provide on the Financial Statements
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according to the flow chart i need to know any assumptions, controls and weaknesses of this purchase order. please give me atleast 5 of each its my exam question.
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Assumptions (if any)
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Explanation / Answer
Assumptions:
1) Occurence: That the purchases are made properly recorded and processed for the payments.
2)Completeness: That the transaction are recorded and shown in the financial statements.It is completed i.e the procedure to record the transaction is completed.
3) Authorization: The authorization procedure is followed or there are proper internal controls.
4) Accuracy: Wheather transactions are free from erroe. They are valued and classified accordingly.
5) Cut Off: That the transactions are recorded in proper financial year.
6) Presentation and disclousre: That the transaction are properly presented in the finanacial statement and necessary disclousre are made.
Ans 2 Control
A Concise Description of the Control Identified Indicating the Design Characteristic that will be tested (the Implementation of Functioning)
Importance of the Control to the Audit
How the Control will be Tested During the Current Audit
1 Purchase Cycle
Inquiries of management, observation and inspection
2 Verification of Trade payable balances
It tells the true picture of the payment to be made. There is no fictitious payment etc
a)Trade payable reconciliation b)cut-of c)reservation of title
d)age analysis
e) Presentation and disclousre
3 checking of Invoice
The invoices should be made proper otherwise there would be wrong recording of transaction, so it will affect the financial statements
a) Random check of invoices B) Proper signature by relevant authority c) Supporting vouchers are attached
4 Goods Received
It should be seen that the goods are properly received. It should be cross checked with the order placed. This will help to know that the goods are received as and when required
5 Payments to vendor
That the vendor gets timely payments. That there are no default. There are proper terma and conditions with the vendor
A Concise Description of the Control Identified Indicating the Design Characteristic that will be tested (the Implementation of Functioning)
Importance of the Control to the Audit
How the Control will be Tested During the Current Audit
1 Purchase Cycle
- Unauthorized purchases may be made for personal gain b) fictitious purchases c) theft
Inquiries of management, observation and inspection
2 Verification of Trade payable balances
It tells the true picture of the payment to be made. There is no fictitious payment etc
a)Trade payable reconciliation b)cut-of c)reservation of title
d)age analysis
e) Presentation and disclousre
3 checking of Invoice
The invoices should be made proper otherwise there would be wrong recording of transaction, so it will affect the financial statements
a) Random check of invoices B) Proper signature by relevant authority c) Supporting vouchers are attached
4 Goods Received
It should be seen that the goods are properly received. It should be cross checked with the order placed. This will help to know that the goods are received as and when required
- Random check
- Received by proper authority
- Check good requisition note
- Check the physical inventory of warehouse
5 Payments to vendor
That the vendor gets timely payments. That there are no default. There are proper terma and conditions with the vendor
- Ask for the balances from the vendor to cross check. Ask for their ledger and match it with ours. B) Do their age analysis. If a payment is due for a long tine know the reason for the same
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