(i) Audit work undertaken to evaluate the assertions underlying

Traverse's inventory and payroll figures in the financial statements:

1. Inventory Assertions:
a. Existence: The audit team verifies whether the inventory recorded in
the financial statements actually exists. This involves physical
observation and counting of inventory items in the warehouses.
b. Completeness: The team ensures that all inventory items are properly
recorded and included in the financial statements. They review the
inventory count procedures, cutoff procedures, and examine supporting
documentation.
c. Valuation: The audit team assesses whether the inventory is valued
accurately in accordance with the applicable accounting standards. They
review the cost accounting methods, overhead allocation, and any
provision for obsolete or slow-moving inventory.
d. Rights and Obligations: The team confirms that the inventory is
owned by Traverse and there are no liens or encumbrances on it. They
examine purchase contracts, sales agreements, and legal documentation
related to inventory.
e. Presentation and Disclosure: The team reviews the inventory
disclosures in the financial statements to ensure compliance with
accounting standards and proper classification of inventory.
2. Payroll Assertions:
a. Existence: The auditors verify the existence of employees by
examining personnel files, employment contracts, and attendance
records. They also perform cutoff procedures to ensure that only valid
employees are included in the payroll.
b. Completeness: The team ensures that all employees are included in
the payroll calculation and that all payroll-related expenses are properly
recorded. They review new hire documentation, termination records,
and payroll register reports.
c. Accuracy: Auditors assess the accuracy of payroll calculations by
performing substantive tests on a sample basis. This involves verifying
the calculation of regular wages, overtime, deductions, and benefits.
d. Rights and Obligations: The auditors confirm that the payroll
expenses are incurred in accordance with employment contracts, labor
 laws, and company policies. They review employment contracts, union
agreements, and payroll policies.
e. Presentation and Disclosure: The team reviews the payroll disclosures
in the financial statements to ensure compliance with accounting
standards and proper classification of payroll expenses.

(ii) Analysis of strengths and weaknesses in Traverse's inventory and payroll

cycles, with recommendations:
1. Inventory Cycle:
Strengths:
 Use of counting teams with independent counters from different
departments enhances accuracy and reduces the likelihood of
errors or fraud.
 Systematic counting process ensures comprehensive coverage of
inventory and minimizes the need for flagging counted areas.
 Use of separate sheets for recording unidentified items helps
identify potential errors or omissions.
Weaknesses:

 Lack of automated inventory tracking system may lead to inefficiencies

and potential errors in recording and reconciling inventory.
 Potential for movement of raw materials and finished products during
the counting process may result in inaccurate inventory quantities.
Recommendations:

 Implement an automated inventory management system to track

inventory movements in real-time and improve accuracy in
recording and reconciling inventory.
 Establish stricter controls to minimize movement of raw materials
and finished products during the counting process to ensure more
accurate inventory counts.

2. Payroll Cycle:
Strengths:
 Jenny's experience and knowledge of employees' leave and accrued
vacation pay facilitate accurate calculation and recording of payroll
expenses.
 Weekly backup of payroll details provides a safeguard against data loss.
Weaknesses:

 Dependency on Jenny for critical payroll processes and absence

coverage may pose a risk of errors or delays in payroll calculations and
payments.
 Lack of testing of payroll calculations increases the risk of errors in the
calculation of overtime, deductions, and net wages.

Recommendations:

 Establish a documented and well-defined process for covering Jenny's

responsibilities during her absence, ensuring another authorized
individual is trained and capable of performing critical payroll tasks.
 Implement periodic testing and review of payroll calculations to identify
and rectify any errors or anomalies in the calculations and ensure
accuracy.
 Consider implementing automated payroll software with built-in checks
and validations to reduce manual errors and improve efficiency.

Overall, Traverse should focus on improving its inventory management

processes through automation and strengthening controls to minimize
movement during the counting process. In the payroll cycle, the company
should address the risk of dependency on a single individual by establishing
backup procedures and conducting regular testing to ensure accuracy in
payroll calculations.