Reference no: EM133018973

Question - Blue Dog Food Limited supplies high quality dog and cat food to retail customers. It has recently expanded to offer a wide variety scientifically balanced dog and cat foods through its own six stores across the state. After some initial problems with stock control it installed a new automated inventory system in April this year. The system replaced another automated system that had been modified so often over the years that the auditor had advised Blue Dog Food Limited's management that they did not regard it as reliable. That is, the auditor was unable to rely on the old system sufficiently to assess control risk for inventory as anything less than high.

The sales transactions at Blue Dog Food Limited are handled by a new software application that is not supported by very detailed documentation. The audit partner requests the team to re-perform some controls to ensure that the software application controls are working as described by Blue Dog Food Limited's management. The audit software used by the audit team can access the data on the client's files, allowing the use of standard audit procedures.

1) Explain the normal process an auditor would expect to find in the client's systems governing changes to computer programs. Why is an auditor concerned about program changes?

2) Dakota Drapers' financial year-end is 31 December. Does the auditor need to obtain evidence about the performance of the inventory control system from every month in the year or from a sample of months? Explain.

3) If the auditor conducts tests of the inventory controls at an interim date, is it appropriate to conclude that the controls also relate to the end of period date? Why?

4) Provide a list of possible audit procedures that could be used by the audit team to test the controls in the client's sales software application.