You are the audit senior on the team auditing JPR Industries, Ltd. (JPR). JPR is a manufacturer
Question:
You are the audit senior on the team auditing JPR Industries, Ltd. (JPR). JPR is a manufacturer of parts used in producing a multitude of industrial equipment that companies require for their worldwide operations. It has grown from a small "garage" operation to a multi-million-dollar operation employing nearly 5,000 people.
JPR is a new client of your firm, Friedrich & Co. (F&C). During the walkthrough of JPR's purchase and payment processes, some employees from the Purchasing Department and Accounts Payable Department told you that
- raw materials are always acquired more than business needs, and there is excessive inventory level
- there is a significant increase in the purchase prices for the raw materials, and some poor-quality raw materials are also purchased
- payments may have been made for raw materials not received or received in bad condition. Sometimes, payments are made for amounts higher than those specified on purchase orders
You are currently preparing the audit program, and you need to make sure that the appropriate audit procedures can be developed to determine if there are any control weaknesses in the JPR's purchase and payment functions.
Required: Describe audit procedures you can use to identify the potential control weaknesses based on the above observations and associated audit objectives.
Auditing The Art and Science of Assurance Engagements
ISBN: 978-0133405507
13th Canadian edition
Authors: Alvin A. Arens, Randal J. Elder, Mark S. Beasley, Joanne C. Jones