Ontario Drapers supplies custom-fitted curtains and blinds to retail customers. It has recently expanded to offer a wide variety of home decorating products through its six stores across the province. After some initial problems with inventory 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 Ontario'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.
Required
(a) 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?
(b) Ontario Drapers' financial year end is December 31. 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.
(c) If the auditor conducts tests of the inventory controls at an interim date, is it appropriate to conclude that the controls are still in place at the end-of-period date? Why?