问答题
Greystone Co is a retailer of ladies clothing and accessories. It operates in many countries around the world and has expanded steadily from its base in Europe. Its main market is aimed at 15 to 35 year olds and its prices are mid to low range. The company’s year end was 30 September 2010.
In the past the company has bulk ordered its clothing and accessories twice a year. However, if their goods failed to meet the key fashion trends then this resulted in significant inventory write downs. As a result of this the company has recently introduced a just in time ordering system. The fashion buyers make an assessment nine months in advance as to what the key trends are likely to be, these goods are sourced from their suppliers but only limited numbers are initially ordered.
Greystone Co has an internal audit department but at present their only role is to perform regular inventory counts at the stores.
Ordering process
Each country has a purchasing manager who decides on the initial inventory levels for each store, this is not done in conjunction with store or sales managers. These quantities are communicated to the central buying department at the head office in Europe. An ordering clerk amalgamates all country orders by specified regions of countries, such as Central Europe and North America, and passes them to the purchasing director to review and authorise.
As the goods are sold, it is the store manager’s responsibility to re-order the goods through the purchasing manager; they are prompted weekly to review inventory levels as although the goods are just in time, it can still take up to four weeks for goods to be received in store.
It is not possible to order goods from other branches of stores as all ordering must be undertaken through the purchasing manager. If a customer requests an item of clothing, which is unavailable in a particular store, then the customer is provided with other branch telephone numbers or recommended to try the company website.
Goods received and Invoicing
To speed up the ordering to receipt of goods cycle, the goods are delivered directly from the suppliers to the individual stores. On receipt of goods the quantities received are checked by a sales assistant against the supplier’s delivery note, and then the assistant produces a goods received note (GRN). This is done at quiet times of the day so as to maximise sales. The checked GRNs are sent to head office for matching with purchase invoices.
As purchase invoices are received they are manually matched to GRNs from the stores, this can be a very time consuming process as some suppliers may have delivered to over 500 stores. Once the invoice has been agreed then it is sent to the purchasing director for authorisation. It is at this stage that the invoice is entered onto the purchase ledger.
Required:
问答题
(b) As the external auditors of Greystone Co, write a report to management in respect of the purchasing system which:
(i) Identifies and explains FOUR deficiencies in that system;
(ii) Explains the possible implication of each deficiency;
(iii) Provides a recommendation to address each deficiency.
A covering letter is required.
Note: Up to two marks will be awarded within this requirement for presentation. (14 marks)
【正确答案】Board of Directors
Greystone Co
30 Any Street
A Town
X Country
8 December 2010
Dear Sirs,
Audit of Greystone Co for year ended 30 September 2010
Please find enclosed the report to management on significant deficiencies in internal controls identified during the audit for the year ended 30 September 2010. The report considers deficiencies in the purchases system, implications of those deficiencies and provides recommendations to address those deficiencies.
【答案解析】
问答题
(c) Describe substantive procedures the auditor should perform on the year-end trade payables of Greystone Co. (5 marks)
【正确答案】
【答案解析】
问答题
(d) Describe additional assignments that the internal audit department of Greystone Co could be asked to perform by those charged with governance.(6 marks)
【正确答案】Additional assignments for Greystone’s internal audit department
Testing cash controls at stores
Currently the internal audit department undertake inventory counts at each of the stores. This role could be increased to include controls testing over cash receipts and cash counts. As a retailer the stores will have a significant amount of cash at each premise and will have tight controls over the cash receipts process. These controls should be tested at each location as well as performance of a cash count to reduce the level of fraud and error reported.
Mystery shopper reviews
In order to improve the customer experience in stores, internal audit department members could undertake ‘mystery shopper’ reviews, where they enter the store as a customer, purchase goods and rate the overall shopping experience. This is then fed back to each shop to improve customer service and can provide the basis for further training if necessary.
Overall review of financial/operational controls
The department could undertake reviews of controls at head office, as well as individual stores and make recommendations to management over such areas as the purchasing process as well as the sales cycle.
Fraud investigations
It is likely that as a retailer, Greystone would have problems with theft of inventory as well as cash. Internal audit could be asked to review the main areas of fraud risk and develop controls to mitigate these risks. If fraud is suspected then internal audit could be asked to investigate these cases further.
IT system reviews
Greystone is likely to have a relatively complex computer system linking all of the tills in the stores to head office. The internal audit department could be asked to perform a review over the computer environment and controls.
Value for money review
The internal audit department could be asked to assess whether Greystone are obtaining value for money in areas such as the just in time ordering system recently introduced.
Regulatory compliance
Greystone operates in countries throughout the world and hence will be subject to varying degrees of law and regulation. The internal audit department could help ensure compliance with those regulations.
【答案解析】