Audit of revenues and receipts cycle Introduction: The chartered accounting firm for which you work,has been appointed as the auditor of Efektif Sport Attire Bhd,a company that manufactures and distributes sports clothing.The company's year end is 31 May 2013.The company has a manufacturing plant,a warehouse and a head office.Upon manufacture,the attires are stored in the warehouses until they are dispatched to ratailers.The company does not have an internal audit department. the audit senior has prepared the following notes on the company's system for revenues,receivables and receipts. Sale and Shipping Goods are sold only on receipt of a written order from customers.On receipt of an order,Miss Cheng in the sales department makes out pre-numbered three-part shipping document.The three copies are sent to Encik Anuar,the officer in-charge of warehouse.The orders are packed and then shipped by the company's vans.The top copy of the shipping document is sent with the goods,the second copy is sent to the accounts department and the third copy is retained in the warehouse.If goods are temporarily out of stock,Encik Anuar sends the shipping document to the customer stamped "BACKORDER-YOUR ORDER CANNOT BE CURRENTLY SHIPPED".he then shredded the second copy and retains the third copy on an unfulfilled order file.When the goods are available,Encik Annuar makes out a new three-part shipping document from a per-numbered set kept in the storeroom and processes this in the usual way. Invoicing When the second copy of shipping document arrives in the accounts department,Cik Sham makes out a two-copy invoice,which is checked for details by Encik Baharum,the account executive.The top copy is sent to the customer and the second copy is retained in the accounts department where Cik Sham records in the sales journal and posts to the accounts receivable.Each week Encik Baharum posts the total of sales invoices for the week to the accounts receivable control account. Cash Receipts customer can only settle their account balance by cheque and these are received along with all the company's mail in the general office.the cheques are listed in the general office.Both the listing and cheques are passed to Cik Sham who posts the individual payments to the appropriate accounts receivable.Each day,Encik Baharum deposited the cheques into the company's bank account and enters the total cash received from the debtors in the cash book.Each week he posts the total cash received from debtors to the accounts receivable control account.Each month,Encik Rashid,the chief accountant.check for the agreement of the accounts receivable and accounts receivable control account. After the office hours,any documents that are not attended yet,will be filed and placed on the table of the respective staff. On reviewing these narrative notes you agree with the strength in the Efektif Sport Attire's system for revenues,receivables and receipts,but also concern of the weaknesses. required: i.State five strength of the system ii.state five weaknesses in the system,and also the possible effect of each weakness. iii.For each of the weakness identified in (ii),suggest a control procedure to correct the deficiency as to prevent it from occurring on a continuing basis. iv.Explain how you would substantiate the company's inventory as at 31 May 2013.
Paper#5924 | Written in 18-Jul-2015Price : $25