You are part of the audit team of ABC Coconut Oil Manufacturing and Export Corporation. You were
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Question:
You are part of the audit team of ABC Coconut Oil Manufacturing and Export Corporation. You were assigned to audit ABC's purchases of copra, the raw material in the production of coconut oil. In your understanding of ABC's raw material procurement process, you found out that suppliers do not issue sales invoices. In your inquiries, you noted that these suppliers are informal associations of farmers who do not have legal and juridical personalities to do business as copra suppliers.
questions
- Given this situation, how will you design an appropriate audit response to ascertain management's key assertions regarding its copra purchases?
- What issues would you highlight in your management letter regarding control deficiencies and business and legal exposures?
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