问答题 5 Hummingbird Scents Co (Hummingbird) manufactures and sells luxury toiletries; they have been trading for over 20 years and the company’s year end is 30 September 2014. Hummingbird sells products to trade customers via its own website; this represents 60% of revenue. Remaining revenue is generated by contracts to supply toiletries to hotels. Below is a description of the sales system. Hotel revenue The hotel revenue is made up of four key customers. Hummingbird has one sales clerk, Brenda, who maintains all aspects of this revenue stream; Brenda receives customer orders, raises sales invoices and processes payments. In raising invoices, the sales system automatically inserts the online trade customer prices for products. However, each hotel customer has contracted prices which are lower than the online prices and hence Brenda manually edits the invoices prior to despatch. Online revenue New trade customers are set up in the sales ledger master file upon passing suitable credit checks, and a credit limit is set at this stage by the finance director. Customers place online orders up to their pre-set credit limit; they receive an email confirmation and the sales order interfaces into the despatch system. The order number is linked to the customer account number. Goods are despatched daily with a goods despatched note which is referenced to the sales order number but are not sequentially numbered. Hummingbird used to despatch goods via a reliable national courier company. However, to reduce costs they have changed to a cheaper local courier and some orders have been delivered to customers late. Trade customers’ sales invoices are automatically generated by the system on the day the online order is placed. The prices are inserted in accordance with the website rates. Occasionally Hummingbird makes special offers or discounts sales; when this occurs the master file data has to be amended to ensure that the correct prices are used on invoices.This task is usually performed by a senior sales ledger clerk. Revenue and receivables records On a monthly basis statements are sent to the hotel customers; a number of trade customers have been requesting monthly statements and Hummingbird is considering this request. The company only reconciles the sales ledger control account at the end of September in order to verify the year-end balance. Required:

问答题 (a) As the external auditor of Hummingbird Co, write a report to management in respect of the sales system described above which: (i) Identifies and explains SEVEN deficiencies in the sales system; and (ii) Provides a recommendation to address each of these deficiencies. A covering letter IS required. Note: Up to two marks will be awarded within this requirement for presentation and the remaining marks will be split equally between each part. (16 marks)

【正确答案】Board of directors Hummingbird Co 23 Buzzard Lane Peregrine City Hawk Country 4 December 2014 Dear Sirs, Audit of Hummingbird Scents Co (Hummingbird) for the year ended 30 September 2014 Please find enclosed the report to management on deficiencies in internal controls identified during the audit for the year ended 30 September 2014. The appendix to this report considers deficiencies in the sales system and recommendations to address those deficiencies. Please note that this report only addresses the deficiencies identified during the audit and if further testing had been performed, then more deficiencies may have been reported. This report is solely for the use of management and if you have any further questions, then please do not hesitate to contact us. Yours faithfully An audit firm

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问答题 (b) Describe substantive procedures the auditor should perform to confirm Hummingbird Co’s revenue.(4 marks)

【正确答案】Substantive procedures for revenue – Compare the overall level of revenue against prior years and budget and investigate any significant fluctuations. – Obtain a schedule of sales for the year broken down into the two categories of hotel and trade customers and compare this to the prior year breakdown and for any unusual movements discuss with management. – Calculate the gross profit margin for Hummingbird and compare this to the prior year and investigate any significant fluctuations. – Select a sample of sales invoices for hotel customers and agree the sales prices back to the contracted rates to ensure the accuracy of invoices. – Select a sample of credit notes raised, trace through to the original invoice and ensure invoice correctly removed from sales. – Select a sample of trade customer orders placed online and agree these to the despatch notes and sales invoices through to inclusion in the sales ledger to ensure completeness of revenue. – Select a sample of despatch notes both pre and post year end; follow these through to sales invoices in the correct accounting period to ensure that cut-off has been correctly applied.

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