Reference no: EM132669953

You have been engaged by the management of Zazandra Sdn. Bhd, a medium sized manufacturing company, to study and evaluate its internal control over the purchases and payments system. You have made the following observations concerning procedures used by Zazandra.

a. Owing to difficulties in recruiting a Purchasing Manager, the company has  undertaken to handle all purchasing requirements through individual requisitioning departments.

b. Goods are received by the Receiving Department together with delivery slips attached. The department head acknowledges the receipt by signing the delivery slips.

c. The delivery slips are sent to Storekeeper. The Storekeeper records the details in the inventory records.

d. The authorized delivery slips are than forwarded to the Accounts Department where they are filed in date order.

e. Upon receipt of vendor invoices, the invoices are forwarded to the Accounts Department where the prices and extensions are verified.

f. Vendor invoices are forwarded to department heads who have requisitioned the goods, for their authorization and the resumed to the Accounts Department for payments.

Required:

Problem a) Briefly describe what techniques you would use to record this system.

Problem b) Why should a company have an independent Purchasing Department?

Problem c) What weaknesses can you identify from your review of the system and the internal control of Zazandra Sdn.Bhd?

Problem d) What errors are likely to result from the control weaknesses you have identified above?

Problem e) Describe two tests of control and two substantive tests for each assertion related to the facts above that the auditor should perform.