Audit



Audit

Overview

This paper focuses on the Assessment of control risk and Tests of controls along with inventory procurement and management function. Beside this, Substantive tests of transactions and balances have been discussed for fixed assets. These are all part of the internal audit which represents the set of technical procedures that aims to examine the integrity, adequacy and effectiveness of internal controls and physical information, accounting, financial and operating a business. Control between the internal audit activities are the review and evaluation of the accounting controls, financial and operational company.

Part 3: Chapter 8 Assessment of control risk &Chapter 9: Tests of controls

The information given by the client indicates that they have much balanced their risk. Effective inventory control allows a company to hold the right amount of stock in the right place at the right time. This ensures that capital is not tied up unnecessarily, and protects production if problems arise with the supply chain (www.aicpa.org).

As they are using computerized inventory function it is flexible and information is easier to retrieve. One can quickly obtain a valuation of a stock or how to find a particular item of stock moves. A computerized system is a good choice for companies dealing with many types of stocks.

Integration with accounting systems and billing data on stock and pricing. All systems are based on the same data set, so you do is enter the data once. Processing orders and processing of vouchers can be integrated into the system so that the stock balance and the statistics are automatically updated as and as orders are processed.

Automatic monitoring of the stock trigger commands when the new command level is reached.

The automatic back if goods produce in batches.

The identification of the cheapest suppliers.

As far as payment function is concern, control risk assessment is also necessary. The views from clients indicate that they have a string system for the payment to be made. The use of inventory management system and price has already been negotiated to the customers. The purchase order is automatically generated. Hence, this control the entire risk as any lacking in the invoice would be detect by the accounts payable officer (APO) in the INV system (Gay G., Simnet R., 2011).

b)

Protection against uncertainty. Reserves in the system, there are uncertainties in the supply of materials, shipment of finished products, as well as in the production cycle. In stock maintained a certain reserves level in order to protect against this uncertainty. If consumer demand was known, it would be possible (though not necessarily economically) to produce at a rate of consumption. In that case, it would not require the presence of the finished goods warehouse. However, any change in demand would be reflected immediately on the production system.

Accounting cost of production and procurement. Often more economical to produce goods in batches. In this case, the shipment can be made in a short time, and then the production will not resume until such time until you are in the new party. This makes it possible to cover the production costs due to the large volume ...