question archive Calgari Clothing Company manufactures high-quality silk ties that are marketed under a number of trademarked names
Calgari Clothing Company manufactures high-quality silk ties that are marketed under a number of trademarked names
Subject:Computer SciencePrice:2.89 Bought3
Calgari Clothing Company manufactures high-quality silk ties that are marketed under a number of trademarked names. Joe & Vandervelte have been the company's auditors for five years. Lisa Austen, the senior-incharge of the audit, has reviewed Calgari's controls over purchasing and inventory, and she determined that a number of controls can be relied upon to reduce control risk. Austen has decided to test two control procedures over purchases and inventory:
(1) Purchase orders are agreed to receiving reports and vendor's invoices for product, quantity, and price
(2) Inventory is transferred to raw material stores using an approved, pre-numbered receiving report.
Austen decided to use a non-statistical sampling approach based on the following judgments for each control procedure and has judgmentally decided to use a sample size of 40 purchase orders for control 1 and 20 receiving reports for control 2.
After completing the examination of the sample items, Austen noted one deviation for each control procedure.
Required:
What conclusion should Austen reach about each control procedure? Justify your answer
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(1) Austen should reach at a conclusion about purchase orders were probably not approved before placing orders and she might have encountered the deviation in the order quantity and quantity received and rates applied on different orders.
(2) The inventory transferred might not be exactly same that was received, and also some of the transferred quantities might not appear pre approved.
