Reference no: EM133018364

MFA 557 International Auditing & Assurance - Accra Business School

Question 1

The management of Swan Limited, has engaged you to review internal control over purchase, receipt, storage and issue of materials. You have prepared the following comments that describes Swan's procedures.

Raw materials, which consist mainly of high cost electronic components, are kept in a locked store room. The store room personnel include a supervisor and four clerks. All are well trained, competent and adequately bonded. Raw materials are removed from the storeroom only upon written or oral authorization of one of the production supervisors.

There are no perpetual inventory records; hence, the storeroom clerks do not keep records of goods received or issued. To compensate for the lack of perpetual records, a physical inventory count is taken monthly by the store room clerks who are well supervised. Appropriate procedures are followed in making the inventory count.

After the physical count, the store room supervisor matches the quantity counted against predetermined reorder levels. If the counts for a given part is below the reorder level, the supervisor enters the part number on materials requisition list and sends this list to the accounts payable clerk. The accounts payable clerk prepares a purchase order for the predetermined reorder quantity for each part and mails the purchase order to the vendor from whom the part was last purchased.

When ordered materials arrived at Swan, they are received by the storeroom clerks. The clerks count the merchandise and agree the counts to the shipper's bill of lading. All vendor's bills of lading are initialed, dated and filed in the storeroom to serve as receiving reports

Required
Describe the weaknesses in internal control and recommend improvements in Swan's procedures for the purchase, receipt, storage and issue of raw materials. Organize your answer sheet into two columns: Weaknesses and recommended Improvements.

QUESTION 2

Soley is a charity (an NGO) whose constitution requires that it raises funds for educational projects. These projects seek to educate children and support teachers in certain countries. Charities in the country from which Soley operates have recently become subject to new audit and accounting regulations. Charity income consists of cash collections at fund raising events, telephone appeals and bequests. (Money left to the charity by deceased persons).

The charity is small and trustees do not consider that the charity can afford to employ a qualified accountant. The charity employs a part time bookkeeper and relies on volunteers for fund raising.

Your firm has been appointed as accountants and auditors to this charity because of the new regulations. Accounts have been prepared but not audited in the past by a volunteer who is a recently retired Chartered Accountant.

a. Discuss the risks associated with the audit of Soley under headings Inherent risk, Control risk and Detection risk and explain the implications of these risks for the overall audit risk.

b. List and explain the audit tests to be performed on income and expenditure from fund raising events.

Question 3

a. Describe the quality of following types of evidence giving two examples of each form of evidence

I. Evidence originated by the auditor
II. Evidence created by third parties
III. Evidence created by the management of the client

b. Describe the general considerations which auditors must bear in mind when evaluating audit evidence

Important assignment instructions

- In terms of structure, presentation and style you are normally required to use:
- ABS preferred Microsoft Word settings o Author-date style APA referencing (which includes in-text citations plus a reference list).

Attachment:- International Auditing.rar