Dunbar Manufacturing PLC is a multi-product manufacturing company with four factories around the country. The auditors, Tickitt

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Dunbar Manufacturing PLC is a multi-product manufacturing company with four factories around the country.

The auditors, Tickitt & Run, have completed the interim audit for the year ending 31 December 2X10 in September 2X10 and are considering their report to management.

The matters they have discovered include:

(a) Each factory has a separate bank account. Sometimes the individual accounts are overdrawn but the bank has agreed to set-off for interest calculation. At times there is a net credit balance.

(b) The factory at Tipton shares the policy of straight line depreciation for its plant but unlike the others does not keep a plant register.

(c) The factory in Oldham buys large quantities of scrap copper from scrap merchants, paying by cash.

Each purchase is approved in writing by the plant works manager but there is no regular check of the cash balance kept to make these purchases.

(d) The inventory of finished goods at Wigan is valued at total absorption cost using budgeted direct wages for overheads purposes. The other factories use a more sophisticated system of departmental overhead recovery based on machine hours.

(e) In all the factories some of the manual workers, classed as casual employees, are paid in cash. Their wages packets are simply given to the foremen to hand out with no formalities.

(f) The factories each use a computerized sales ledger system with complex analytical facilities. One facility, to analyze sales on a month to month and year by year basis for each customer, is not used.

Questions:-

1. How should these matters be treated in reports to management?
2. Draft such reports.

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Auditing

ISBN: 9780134613116

10th Edition

Authors: Alan Millichamp, John Taylor

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