Recommendations – NBC Institute

AA – Nov 2015 – L2 – Q1a – Audit and Assurance Risk Environment, Planning and Approach for Audit and Assurance Engagements

This question addresses identifying deficiencies in an inventory count, implications, and recommendations.

Question

Your firm is the external auditor of The Ceramicz Company, and you recently attended the year-end inventory count at the company’s warehouse. The company manufactures high-quality tableware (plates, cups, and saucers, etc.) and maintains an integrated computerised system that shows the inventory held at any point in time.

At the year-end inventory count, reports showing the various categories of inventories (but not the quantities) are printed off the system, and the quantities of inventories actually counted are inserted manually by the counters. Later, the quantities are compared with those per the computer system.

The count instructions were received by both you and the counters the day before the count was due to take place. The instructions consisted of the following five points:

Counters must arrive at 8 am on the morning of the count.
They will work in teams of two people.
Each team will be assigned a specific area of the warehouse to count. They will receive inventory sheets listing the products to be found in their area.
The inventory sheets are pre-numbered.
Once the counters have finished the inventory count, the inventory sheets must be handed to the warehouse manager.
Your notes from the attendance at the count include the following observations:

Many areas in which the count took place were untidy, and inventory was sometimes difficult to find because it was not in the allocated area. The same categories of inventories were sometimes found in several different areas, and some inventory was incorrectly labelled.
The count was conducted in a hurry in order to close the warehouse before a public holiday, and there were insufficient counters to conduct the count properly in the time available. The issue and receipt of inventory sheets (on which the quantities were recorded by counters) were not properly controlled. It was difficult to reconcile the inventory quantities recorded at the count to the computerised records, and some significant differences remain outstanding.
Although no finished goods were dispatched during the inventory count, a large delivery of raw materials was received into the warehouse.
Required:

a) For the inventory count conducted by the Ceramicz Company:
i. Identify and explain FOUR (4) deficiencies in the count.
ii. Explain the possible implication of each deficiency and
iii. Provide a recommendation to address each deficiency.
(12 marks)

Answer

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Tags: Audit Procedures, Deficiencies, Inventory Count, Recommendations
Level: Level 2

Topic: Audit and Assurance Risk Environment, Planning and Approach for Audit and Assurance Engagements
Series: NOV 2015

AA – May 2018 – L2 – Q2b – Audit and Assurance Risk Environment

Identifies deficiencies in a company's wages system and provides recommendations to prevent misstatements in financial statements.

Question

Third Floor Ltd is a construction company with many contracts being executed concurrently. A large number of workers are on various construction sites. Third Floor Ltd has an internal audit department, and the team is currently reviewing cash wages systems within the company.

The following information is available concerning the wages systems:

Workers on each site are controlled by a foreman. The foreman has a record of all employee numbers and can issue temporary numbers for new employees.
Any overtime is calculated by the computerised wages system and added to the standard pay.
The two staff in the wages department make amendments to the computerised wages system in respect of employee leave, illness, as well as setting up and maintaining all employee records.
The computerised wages system calculates deductions from gross pay, such as employee taxes (PAYE), and other statutory deductions.
Finally, a list of net cash payments for each employee is produced. Cash is delivered to the wages office by secure courier. The two staff place cash into wages envelopes for each employee along with a handwritten note of gross pay, deductions, and net pay. The envelopes are given to the foreman for distribution to the individual employees.

Required:
Identify and explain FIVE deficiencies in Third Floor Ltd’s system of internal control over the wages system that could lead to misstatements in the financial statements, and, for each deficiency, suggest an internal control to overcome that deficiency. (15 marks)

Answer

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Tags: Deficiencies, Internal Control, Misstatements, Recommendations, Risk, Wages system
Level: Level 2

Topic: Audit and Assurance Risk Environment
Series: MAY 2018

AA – May 2018 – L2 – Q2a – Professional and Ethical Considerations

Identifies corporate governance weaknesses in a company and provides solutions to align with good governance principles.

Question

Mr. Frimpong Dogbe is the Leader, Founder, Chief Executive Officer, and Board Chairman of Awurade Hwe Ltd. He single-handedly appointed a board of five executive and two non-executive directors. No formal performance targets are set for the senior managers in the company, and no review of board policies is carried out. Mr. Frimpong Dogbe is the one who sets Board salaries based on his assessment of all the board members, including himself, and not on their actual performance.

Internal controls in the company are monitored by the Senior Accountant, although detailed review is assumed to be carried out by the external auditors. Awurade Hwe Ltd does not have an internal audit department.

Required:
Describe FIVE corporate governance weaknesses faced by Awurade Hwe Ltd, which do not comply with corporate governance principles, and for each weakness, recommend a solution to overcome the weakness. (10 marks)

Answer

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Tags: Board Structure, Corporate Governance, Governance weaknesses, Internal Controls, Recommendations
Level: Level 2

Topic: Professional and Ethical Considerations
Series: MAY 2018

AAA – May 2016 – L3 – Q5a – Internal audit and outsourcing | Audit evidence

Prepare a report to management on the deficiencies in the payroll internal control system and provide recommendations.

Question

a) Broni & Co. have audited the annual financial statements of Bibini Co. Ltd., a public limited liability company, for the year ended 31st December 2014. The accounting system of the company is partially computerized.

During the audit, it was detected that just two members of staff out of one hundred and fifty workers were entirely and equally responsible for the maintenance of personnel records and preparation of the payroll. The chief accountant only confirms that the amount of the wages and salaries cheque agrees with the total of the net wages column in the payroll, then he signs without any reasonableness check of the amount of the total wages cheque. This situation is a serious deficiency in the control system which can have serious implications. As audit senior, you are considering communicating this situation to management, showing the deficiency, implications, and recommendations.

Required:
Prepare an appropriate report to management on the deficiency noted in the internal control system for payroll. (10 marks)

Answer

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Tags: Deficiency, Internal Control, Management Report, Payroll System, Recommendations
Level: Level 3

Topic: Audit evidence, Internal audit and outsourcing
Series: MAY 2016

AA – Nov 2015 – L2 – Q1a – Audit and Assurance Risk Environment, Planning and Approach for Audit and Assurance Engagements

This question addresses identifying deficiencies in an inventory count, implications, and recommendations.

Question

The count instructions were received by both you and the counters the day before the count was due to take place. The instructions consisted of the following five points:

Answer

Find Related Questions by Tags, levels, etc.

Tags: Audit Procedures, Deficiencies, Inventory Count, Recommendations
Level: Level 2

Topic: Audit and Assurance Risk Environment, Planning and Approach for Audit and Assurance Engagements
Series: NOV 2015

AA – May 2018 – L2 – Q2b – Audit and Assurance Risk Environment

Identifies deficiencies in a company's wages system and provides recommendations to prevent misstatements in financial statements.

Question

The following information is available concerning the wages systems:

Workers on each site are controlled by a foreman. The foreman has a record of all employee numbers and can issue temporary numbers for new employees.
Any overtime is calculated by the computerised wages system and added to the standard pay.
The two staff in the wages department make amendments to the computerised wages system in respect of employee leave, illness, as well as setting up and maintaining all employee records.
The computerised wages system calculates deductions from gross pay, such as employee taxes (PAYE), and other statutory deductions.
Finally, a list of net cash payments for each employee is produced. Cash is delivered to the wages office by secure courier. The two staff place cash into wages envelopes for each employee along with a handwritten note of gross pay, deductions, and net pay. The envelopes are given to the foreman for distribution to the individual employees.

Answer

Find Related Questions by Tags, levels, etc.

Tags: Deficiencies, Internal Control, Misstatements, Recommendations, Risk, Wages system
Level: Level 2

Topic: Audit and Assurance Risk Environment
Series: MAY 2018

AA – May 2018 – L2 – Q2a – Professional and Ethical Considerations

Identifies corporate governance weaknesses in a company and provides solutions to align with good governance principles.

Question

Answer

Find Related Questions by Tags, levels, etc.

Tags: Board Structure, Corporate Governance, Governance weaknesses, Internal Controls, Recommendations
Level: Level 2

Topic: Professional and Ethical Considerations
Series: MAY 2018

AAA – May 2016 – L3 – Q5a – Internal audit and outsourcing | Audit evidence

Prepare a report to management on the deficiencies in the payroll internal control system and provide recommendations.

Question

Required:
Prepare an appropriate report to management on the deficiency noted in the internal control system for payroll. (10 marks)

Answer

Find Related Questions by Tags, levels, etc.

Tags: Deficiency, Internal Control, Management Report, Payroll System, Recommendations
Level: Level 3

Topic: Audit evidence, Internal audit and outsourcing
Series: MAY 2016

Question Tag: Recommendations

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AA – Nov 2015 – L2 – Q1a – Audit and Assurance Risk Environment, Planning and Approach for Audit and Assurance Engagements

This question addresses identifying deficiencies in an inventory count, implications, and recommendations.

AA – May 2018 – L2 – Q2b – Audit and Assurance Risk Environment

Identifies deficiencies in a company's wages system and provides recommendations to prevent misstatements in financial statements.

AA – May 2018 – L2 – Q2a – Professional and Ethical Considerations

Identifies corporate governance weaknesses in a company and provides solutions to align with good governance principles.

AAA – May 2016 – L3 – Q5a – Internal audit and outsourcing | Audit evidence

Prepare a report to management on the deficiencies in the payroll internal control system and provide recommendations.

AA – Nov 2015 – L2 – Q1a – Audit and Assurance Risk Environment, Planning and Approach for Audit and Assurance Engagements

This question addresses identifying deficiencies in an inventory count, implications, and recommendations.

AA – May 2018 – L2 – Q2b – Audit and Assurance Risk Environment

Identifies deficiencies in a company's wages system and provides recommendations to prevent misstatements in financial statements.

AA – May 2018 – L2 – Q2a – Professional and Ethical Considerations

Identifies corporate governance weaknesses in a company and provides solutions to align with good governance principles.

AAA – May 2016 – L3 – Q5a – Internal audit and outsourcing | Audit evidence

Prepare a report to management on the deficiencies in the payroll internal control system and provide recommendations.

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AA – Nov 2015 – L2 – Q1a – Audit and Assurance Risk Environment, Planning and Approach for Audit and Assurance Engagements

This question addresses identifying deficiencies in an inventory count, implications, and recommendations.

You're reporting an error for "AA – Nov 2015 – L2 – Q1a – Audit and Assurance Risk Environment, Planning and Approach for Audit and Assurance Engagements"

AA – May 2018 – L2 – Q2b – Audit and Assurance Risk Environment

Identifies deficiencies in a company's wages system and provides recommendations to prevent misstatements in financial statements.

You're reporting an error for "AA – May 2018 – L2 – Q2b – Audit and Assurance Risk Environment"

AA – May 2018 – L2 – Q2a – Professional and Ethical Considerations

Identifies corporate governance weaknesses in a company and provides solutions to align with good governance principles.

You're reporting an error for "AA – May 2018 – L2 – Q2a – Professional and Ethical Considerations"

AAA – May 2016 – L3 – Q5a – Internal audit and outsourcing | Audit evidence

Prepare a report to management on the deficiencies in the payroll internal control system and provide recommendations.

You're reporting an error for "AAA – May 2016 – L3 – Q5a – Internal audit and outsourcing | Audit evidence"

AA – Nov 2015 – L2 – Q1a – Audit and Assurance Risk Environment, Planning and Approach for Audit and Assurance Engagements

This question addresses identifying deficiencies in an inventory count, implications, and recommendations.

You're reporting an error for "AA – Nov 2015 – L2 – Q1a – Audit and Assurance Risk Environment, Planning and Approach for Audit and Assurance Engagements"

AA – May 2018 – L2 – Q2b – Audit and Assurance Risk Environment

Identifies deficiencies in a company's wages system and provides recommendations to prevent misstatements in financial statements.

You're reporting an error for "AA – May 2018 – L2 – Q2b – Audit and Assurance Risk Environment"

AA – May 2018 – L2 – Q2a – Professional and Ethical Considerations

Identifies corporate governance weaknesses in a company and provides solutions to align with good governance principles.

You're reporting an error for "AA – May 2018 – L2 – Q2a – Professional and Ethical Considerations"

AAA – May 2016 – L3 – Q5a – Internal audit and outsourcing | Audit evidence

Prepare a report to management on the deficiencies in the payroll internal control system and provide recommendations.

You're reporting an error for "AAA – May 2016 – L3 – Q5a – Internal audit and outsourcing | Audit evidence"

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