Chapter 6

Q1-

A) Procedures needed to understand the Rockco:

 Audit strategy and plan
 So make sure that the auditor understand the scope, extent and direction of the audit by
understanding the nature of resources of rock and how they are deployed- when they
are deployed and the amount of resources need. Finally making sure how the resources
are supervised and directed.
 Furthermore, audit plan can make sure about the little details that might have been
missed when performing the overall approach- aka audit strategy. The auditor can make
sure that the audit plan is performed in its nature, extent and timeliness of audit
procedures and risk assessment. The nature, extent and timeliness of audit procedure is
basically- how, when, and what the audit will be done. The auditor can also supervise
the and direct the engagement of the team.
 The auditor can also perform intermin and final audit as well- its imp to understand that
these two are differnel level of audit performance but are of the same audit- The
difference lies in between the time purpose and work performed. An interment audit
preformed can detect the level of risk to be controlled, helping or reducing the number
of substantive testing needed in the final audit.
 Fraud and error can also be detected by the audit in order to understand the
management and the level of governance in the rock.co company as to see the level of
intergtiy remained in these levels of management.
 Surprise asset count test can also be done to figure out misappropriation.
 Can also check for fraudelnt reportinh as this company has variety of different brand
names they perform under.
 Laws and regulations on non compliance to make sure the firm follows ethical standards
when importing.
 Some audit procedures to identify non compliance is to understand, have koneldge on
the standards, have inspecting correspondence, obtain written representation, engage
with the rocks governance and management and lasty remain alert by having
professional skepticism.
 Maintain quality management by understanding the rocks engagement resources,
performance and engagement quality reviewer. Making sure the we the audit are
provided with all the resources and access to info need in order to perform the
engagement.
 Have access to the audit documentation of the rocks in order to understand their
previous work ethic .
 CHAPTER 8
Q1-
DIRECT CONTROL
Credit checks are not repformed unless increase
in credit limit is required by the customer, and
credit application is checked with credit agency-
this reduces the risk of bad debts as sales are only
recginuzed when sales are made reducing bad
debts. However increase bad debts can lead to
reduction in profit and cash flows and overtstad
revuvales if not written off.
Orders are entered by sales manager and diuble
checked by the sales assiant over the
transactions, good alavuble and credit limit is not
crossed- this ensures that goods are given to thise
customers that have promise of payubgf back as
per their credit limit and thus makes sure there in
no risk of bad debts occurung- whuhc in regards
can affect the profit of the company, cashflows by
decreasing them bith and if bad bets are not
written off can lead to iverstaed of debtors.
GDNs are given out when revied an order- packed
by a member and then recehced by another
member to diuboe cjheck- this ensures that good
sold are not messed up ir cinfued with different
gdns and also ensure that fraud and theft og
goods is refuced as dibble checked- this helps
murray as less riskof theft, so less risk ir recution
of invetiry which could been over/under stated if
not aware of goods theft- and happy custmores
as endutrd gnds are no mmized up- aka better
image aka sales nit affected -aka proft it okay.
Four copies sent out of GDNs -this is good as it
lets know the customr actually revcined the good,
sent to sale and accounts dep make sures ni
reptation od misundetsinag arises- this helps
murray to not have material misstaemtns in their
f/s and reucred erro of omission.
Sales invoices are raised by using gdns – this
ensures inocies are actuukay free from errors and
fraud as thye crossped with the gdns. Reduction
in errors nsf fraud receud the risk of misstaments
presnrt in f.s. also make sure correct aamunt have
been entered and no misyjndrtun wutht he
TEST OF CONTROL
Inspect the credit checks meet within the credit
limit of each reveicnale.
Obseves and make sure the credit checks are in
performed.
Can observe the sales assiant enering into sales
system as well insocte the sales transactions
actually match with their credit limit.
Can verify if the good avaule are actually guven
out in regard to the fact orders are not taken out
over tjier credit limit.
Can actyally can go not the warehouse to inspect
and observed the members oaknng goods in
terms of gdns received. Can sample test one if
gdns to be despatched by checking the goods
match up aganstthe gdns primted out.
Check old sample of evdince if gdns to see if they
actyually match up with goods depstched.
Aduitor can ehquire with customres when they
reciev the goods, can also insect an verfuy files of
recit in warhuse to see if they cross check with
sales and account dep atrments receipts.
Csn double check and isnocet the invoices with
gnds from a cerrian sample to verify this control,
The auditon can also enquire accounts
ndepartemtn and sales department to see vefity
this.
custimres- increasing good relationship with
customer.
Sales invoices are made pepried in regards the
updated version of compies price list- aguan
makes urea mouths are made correct- no angry
cidtomiet
Discounts are requestd by sales manager and
authirse by sadles director- segrtion if suies
Increaser fraud and errors aka misstaments in f/s
and loss accours for firms- reducing the revenue if
wring disciutns aren made
DIRECT CONTROL
1)goods and services are placed by requisition
which is pre-numbered and checked weekly. And
all requisitions are authorized by manager- this
will cause segregation of duties and
authorization.
Weekly checks and pre0numbers help keep track
of purchases reducing the risk of misstatements
occurring as well reducing misunderstanding and
repetition of goods bought- which will over all
can over/under state the payables. Segregation of
duties can cause high risk of fraud and errors.
Isncetos or enwuire if the pricing system is
uodsste quarterly and whether or not sales
inocies are made in respcti this.
Inscoest the samloe to see oast dosicnts and see
whenter any frau had 0coured
Observs the sles dietcr and mahne when they
allow the disunt
Veryf with inoces t0 and gnds an to check whenu
it accytlaluy need the dosucnt
Have others party to g8ve pit doucounts in orde
to reducr errors
TEST OF CONTROL
1) Can test and observe the manager
authorize the requisitions, and can also
find someone independent to authorize
the requisitions. Can test a sample of
purchase requisition to check if they are
pre-numbered and performed weekly.
Can test and run the system by checking
if requestions are pre-numbered.