- This topic has 5 replies, 2 voices, and was last updated 11 months ago by
Kim Smith.
Kim Smith.-
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Jiya024
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Professor, isnt the below one simply a business deficiency, rather than something like control deficiency?
I don’t see how auditor should be concerned of this?“It is not possible for a store to order goods from other local stores for customers who request them. Instead, customers are told to contact the other stores or use the company website.
Customers are less likely to contact individual stores themselves and this could result in the company losing valuable sales.
In addition, some goods which are slow moving in one store may be out of stock at another; if goods could be transferred between stores, then overall sales may be maximised.”Jiya024
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query 2)
Professor is there any specific reason why they have not mentioned the CONTROL DEFICIENCY related to LACK OF SEQUENTIAL NUMBERING of purchase orders processed by Oliver Dancer? because if Purchase orders are not sequentially numbered then Mr. Oliver could miss out on certain purchase orders leading to stock outs/manufacturing delays.
Jiya024
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query 3)
in the 3rd TOC the kit states that:
“Undertake a sequence check of GRNs held by the accounts department and discuss any missing items with the accounts clerk.”
why can’t the external auditor just:
“REVIEW whether all GRNs are sequentially numbered and have a proof of evidence in the form of signature that sequential check was undertaken by accounts department.”
I get a little confused ma’am as to when the auditor should “REVIEW” and when “UNDERTAKE” a certain activity themselves. Is there any exhaustive list which provides some definite guidance of what should be done, when a certain type of activity takes place/doesnt take place?
Kim Smith
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1. You are absolutely right – as worded, these answer points have NO place in AA as business risk has not been examinable in AA for more than 10 years. It looks to me that this question and answer took some ideas from an old question from 2010 but overlooked this. It is certainly a shame that the answer starts with these points as it is can only confuse(!)
Kim Smith
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2. But stock-outs/loss of manufacturing days is a business risk so not relevant. So unless you can think of a reason why sequential numbering is necessary (to prevent or detect and correct misstatements) its absence is not a deficiency.
Kim Smith
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To undertake/perform/do a sequence check is to look at every number and spot at any number that is missing …
20186
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20195That is different to flicking through a sheaf of documents and seeing that they all have a number in the top right-hand corner.
You could OBSERVE an employee of the client performing a sequence check – and initialling something (a purchase order book, say) – to indicate that they have done so.
You could INSPECT signatures to indicated that someone is supposed to have carried out the check.
Or you can REPERFORM the sequence check (as I described above).
They will all get credit because they recognise the same thing – that you are testing the control that is sequence checking.
Jiya024
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