Question: On January 11 at the beginning of your annual audit

On January 11, at the beginning of your annual audit of the Grover Manufacturing Company’s financial statements for the year just ended December 31, the company president confides to you that an employee is living on a scale in excess of that which his salary would support.
The employee has been a buyer in the purchasing department for six years and has charge of purchasing all general materials and supplies. He is authorized to sign purchase orders for amounts up to $2000. Purchase orders in excess of $2000 require the countersignature of the general purchasing agent.
The president understands that the usual audit of financial statements is not designed to disclose immaterial fraud or conflicts of interest, although such events may be discovered. The president authorizes you, however, to expand your regular audit procedures and to apply additional audit procedures to determine whether there is any evidence that the buyer has been misappropriating company funds or has been engaged in activities that are a conflict of interest.

List the audit procedures that you would apply to the company records and documents in an attempt to:
1. Discover evidence within the purchasing department of defalcations being committed by the buyer. Give the purpose of each audit procedure.
2. Provide leads about possible collusion between the buyer and suppliers. Give the purpose of each audit procedure.

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  • CreatedJanuary 09, 2015
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