You are an audit senior in Brennon & Co., a firm providing audit and assurance services....

  

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You are an audit senior in Brennon & Co., a firm providing audit and assurance services. At the request of an audit partner, you are preparing the audit program for the income and receivables systems of Seeley Co. Audit documentation is available from the previous year's audit, including internal control questionnaires and audit programmes for the despatch and sales system. The audit approach last year did not involve the use of computer- assisted audit techniques (CAATs) the same approach will be taken this year. As far as you are aware, Seeley's system of internal control has not changed in the last year. Client background-sales system Seeley Co is a wholesaler of electrical goods such as kettles, televisions, MP3 players, etc. The company maintains one large warehouse in a major city. Seeley customers are always owners of small retail shops, where electrical goods are sold to members of the public. Seeley only sells to authorised customers and, following appropriate credit checks, each customer is given a Seeley identification card to confirm their status. The card must be used to obtain goods from the warehouse. Despatch and sales system The despatch and sales system operates as follows. 1. 2. Customers visit Seeley's warehouse and load the goods they require into their vans after showing their Seeley identification card to the despatch staff. A pre-numbered goods despatch note (GDN) is produced and signed by the customer and a member of Seeley's despatch staff confirming goods taken. One copy of the GDN is sent to the accounts department, the second copy is retained in the despatch department. 3. 4. Accounts staff enter goods despatch information onto the computerised sales system. The GDN is signed. 5. The computer system produces the sales invoice, with reference to the inventory master file for product details and prices, maintains the sales day book and also the receivables ledger. The receivables control account is balanced by the computer. 6. Invoices are printed out and sent to each customer in the post with paper copies maintained in the accounts department. Invoices are compared to GDNs by accounts staff and signed. Paper copies of the receivables ledger control account and list of aged receivables are also available. Error reports are produced showing breaks in the GDN sequence. 7. 8. Required (a) Explain the steps necessary to check the accuracy of the previous year's internal control questionnaires. (b) Using information from the scenario, list six tests of control that an auditor would normally carry out on the dispatch and sales system at Seeley Co, and explain the reason for each test. You are an audit senior in Brennon & Co., a firm providing audit and assurance services. At the request of an audit partner, you are preparing the audit program for the income and receivables systems of Seeley Co. Audit documentation is available from the previous year's audit, including internal control questionnaires and audit programmes for the despatch and sales system. The audit approach last year did not involve the use of computer- assisted audit techniques (CAATs) the same approach will be taken this year. As far as you are aware, Seeley's system of internal control has not changed in the last year. Client background-sales system Seeley Co is a wholesaler of electrical goods such as kettles, televisions, MP3 players, etc. The company maintains one large warehouse in a major city. Seeley customers are always owners of small retail shops, where electrical goods are sold to members of the public. Seeley only sells to authorised customers and, following appropriate credit checks, each customer is given a Seeley identification card to confirm their status. The card must be used to obtain goods from the warehouse. Despatch and sales system The despatch and sales system operates as follows. 1. 2. Customers visit Seeley's warehouse and load the goods they require into their vans after showing their Seeley identification card to the despatch staff. A pre-numbered goods despatch note (GDN) is produced and signed by the customer and a member of Seeley's despatch staff confirming goods taken. One copy of the GDN is sent to the accounts department, the second copy is retained in the despatch department. 3. 4. Accounts staff enter goods despatch information onto the computerised sales system. The GDN is signed. 5. The computer system produces the sales invoice, with reference to the inventory master file for product details and prices, maintains the sales day book and also the receivables ledger. The receivables control account is balanced by the computer. 6. Invoices are printed out and sent to each customer in the post with paper copies maintained in the accounts department. Invoices are compared to GDNs by accounts staff and signed. Paper copies of the receivables ledger control account and list of aged receivables are also available. Error reports are produced showing breaks in the GDN sequence. 7. 8. Required (a) Explain the steps necessary to check the accuracy of the previous year's internal control questionnaires. (b) Using information from the scenario, list six tests of control that an auditor would normally carry out on the dispatch and sales system at Seeley Co, and explain the reason for each test.

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a Steps to Check the Accuracy of Previous Years Internal Control Questionnaires 1 Review and Update Explanation in Detail Examine Previous Years Questionnaires Begin by thoroughly examining the intern... View the full answer