Audit programme – Test of controls substantive tests of - Webs.doc

? Sharon Cheuk Choy Sheung, 2007, All Rights Reserved. Participation does not warrant reproduction.Audit programme –Test of Controls – Inventory Warehousing CycleAudit objectiveAudit procedureHintCommentsInventories are physically controlled safe from theft/misuse – Validity.Examine raw materials storage area to determine whether the inventory is protected from theft or misuse. E.g. locked storeroom, with competent custodian.In real life, you would be observing the storage area and checking for physical controls. In this case study, ask the client.The storeroom is locked, and a storekeeper is responsible for the stock.Recorded transfers of inventories exist – Validity. The quantity, description date of all recorded transfers are accurate - Accuracy.Test for transfer of goods from the raw materials storeroom to the manufacturing assembly line by:accounting for sequence of raw material purchase requisitionsexamining requisitions for proper approvalcomparing the quantity, description date with the information on the raw materials master fileComparing completed production records with finished goods master file to ensure that all manufactured goods were physically delivered to the finished goods storeroom.Use the completed production record for 1 day only, i.e. 27 August 2006.All in sequence.All approved by Stephen Chin, Purchasing Manager.All info matches with the Inventory Master File.Compared, OK.Timeliness.Ensure that inventories received are processed daily and included in the receiving reports.Ensure that shipping documents are processed daily to record the shipment of goods.Ask the client about this.Client’s response:Inventories received are processed daily included in the receiving reports, except when the receiving clerk goes on leave. When that happens, a replacement clerk may issue receiving reports only on the following day.Shipping documents are processed daily.Authorisation.Review authorised production schedules.Review procedures which control inv