You are the auditor of Nutty about Nuts (NN), a wholesaler of nuts who imports large quantities of nuts from Africa and South America, packages them, and then supplies Australian department stores. NN purchases nuts using the following process:

 

The logistics manager forecasts demand, and based on these projections obtains quotes from suppliers. When a price has been agreed, an order is placed with a relevant supplier;

When the nuts are received, the warehouse manager tastes a sample of the nuts and only accepts them if they are of acceptable quality. The warehouse manager also checks that the quantity on the shipping document matches the purchase order;

When invoices are received from suppliers, they are given a sequential invoice number in the accounts department;

Before payment of supplier invoices, the accountant ensures that the invoiced quantities match the purchase order. 

Required
 

1) Identify two controls in the above system. For each control state the relevant assertion and how you would test the control

2) Identify two weaknesses in the above system and explain the relevant assertion affected

 

Part B
A major part of NN's assets comprises the value of the land that NN owns (currently occupied by NN's office and warehouse). This land is situated next to a river in an area that was once industrial but has recently been rezoned for residential apartments. Consequently, NN has revalued this land upwards by a highly material amount.

Required:

1) Discuss when it is appropriate for an auditor to rely on the work of an expert, and whether it would be appropriate in this case?

2) If an expert was used, provide two factors you would need to consider before placing reliance on the expert's work?

Answer rating: 100% (QA)

Part A Controls a Control Quality control of incoming nuts by the warehouse manager Relevant assertion Existence and valuation Testing To test this co... View the full answer