Explain the impact of three internal control weaknesses

Assignment Help Accounting Basics

Reference no: EM132985832

Purchasing Process, PPE, and IT General Controls.

Grafite International Inc. (Grafite) is a manufacturer of various components used in the electricity distribution industry. It has factories across the country, and its customer base includes a variety of municipal and provincial electricity distributors. You are an audit senior with Grafite's external auditors, Eden & Choi, Licensed Public Accountants. You are currently familiarizing yourself with Grafite's operations to plan the audit of Grafite's financial statement for its September 30, 20X5, year-end.

In the past six months Grafite has made significant changes to some of its manufacturing processes and as a result, has purchased new equipment. Because of the changes, Grafite has a lot of equipment that is no longer being used. Purchase requisitions for all new equipment have been authorized by production managers. Since all of their attention has been focused on starting up the new equipment, little has been done about the old, unused equipment.

You have learned that Grafite has also made some changes in its purchasing department

to cut costs. Two purchasing department employees were laid off. As a result, supplier statement reconciliations are no longer being performed; these used to be performed monthly by one of the laid-off purchasing department employees. Also, updates to supplier details in the purchase ledger master file can now be made by anyone in the purchasing department who has time to do it, not just by the manager.

Required:

a. Identify and explain the impact of three internal control weaknesses in Grafite's purchasing process. Recommend a control procedure that Grafite should implement to address each of these weaknesses.

b. Explain the impact of these deficiencies on your planned audit program for PPE.

c. Describe four substantive audit procedures that you would perform for PPE at your year-end audit to determine whether PPE is materially misstated.

Reference no: EM132985832

Questions Cloud

Find what forecast would be : Suppose we have a method of forecasting where the forecast for the next period is identical to the previous periods observed data. This forecast would be

What will your retirement investment be worth 34 years : If you believe you will earn an effective annual rate of return of 12.1%, what will your retirement investment be worth 34 years from now?

How much did really cost to take the course : What if you were employed and needed to take 40 hours off from work (where you earn $20/hr) in order to take the class. Would this matter?

What annual dividend must the company offer : The company wants the stock to sell for $743.00 per share. What annual dividend must the company offer?

Explain the impact of three internal control weaknesses : Identify and explain the impact of three internal control weaknesses in Grafite's purchasing process. Recommend a control procedure that Grafite

What the most appropriate forecasting method : What the most appropriate forecasting method or methods to use would be? Suppose you wanted to use a time series technique to predict the population

Estimate of the systematic risk of the equity : Estimate of the systematic risk of the equity for the company's new investment?

What amount of under- or overlapped manufacturing overhead : What was the amount of under- or overlapped manufacturing overhead? Explain what the meaning of under or overlapped manufacturing overhead

How delta would disclose its employee benefits : How Delta would disclose its employee benefits costs in the SPLOCI and SFP as of 30th September 2020. Ignore accounting policy notes

User Account

All Pages