Question

In: Accounting

Fish Meal Manufacturing is a small privately-owned producer of canned fish, fish oil products for the...

Fish Meal Manufacturing is a small privately-owned producer of canned fish, fish oil products for the consumer market. They hired an auditor to perform the audit of Fish Meal for the calendar year ended December 31, 2019. Auditor came to know that there were fluctuation in purchase pricing on every voucher since no official purchase order are maintained for trade purchases and delivered goods used to be returned from the sea port due to export department mistakes.
Based on the above scenario:   
1. Identify and explain the control deficiencies, substantive errors, and lastly other matters related to purchases and various vouchers that the audit team will prepare. (3 marks )
2. Describe types of vouching system that the team can be used.   

Solutions

Expert Solution

Answer:

a)

The auditor's goal in an audit of internal control over financial reporting is to communicate a supposition on the adequacy of the organization's internal control over financial reporting. Since an organization's internal control can't be viewed as successful on the off chance that at least one material weaknesses exist, to frame a reason for communicating an opinion, the auditor must plan and perform the audit to get proper proof that is adequate to acquire sensible confirmation about whether material weakness exist as of the date determined in the executives' assessment. A material weakness in internal control over financial reporting may exist in any event, when budget reports are not materially misstated. The auditor should utilize the equivalent reasonable, perceived control system to perform their audit of internal control over financial reporting as the executives utilizes for its yearly assessment of the viability of the organization's internal control over financial reporting.

The auditor ought to appropriately design the audit of internal control over financial reporting and appropriately regulate the engagement colleagues. When planning a coordinated audit, the auditor ought to assess whether the accompanying issues are essential to the organization's fiscal reports and internal control over financial reporting and, provided that this is true, how they will influence the auditor's methods -

  • Information on the organization's internal control over financial reportinng got during different commitment performed by the auditor;
  • Matters influencing the business where the organization works, for example financial reporting practices, economic conditions, laws and guidelines, and mechanical changes;
  • Matters identifying with the organization's business, including its association, working qualities, and capital structure;
  • The extent of ongoing changes, assuming any, in the organization, its tasks, or its internal control over financial reporting;
  • The auditor's starter decisions about materiality, risk, and different elements identifying with the assurance of material weakkness;
  • Control insufficiencies recently conveyed to the audit committee or the board;
  • Legitimate or administrative issues of which the organization knows;
  • The sort and extent of accessible proof identified with the adequacy of the organization's internal control over financial reporting;
  • Public data about the organization pertinent to the assessment of the probability of material budget summary errors or misstatements and the adequacy of the organization's internal control over financial reporting;
  • Information about risks identified with the organization assessed as a feature of the auditor's customer acknowledgment and maintenance assessment; and
  • The overall unpredictability of the organization's tasks or operations.

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b)

There are four distinct kinds of Vouchers in Accounting. They are:

Payment voucher :

A Payment voucher is utilized to record an payment of money or check. For this situation, the money/bank will be credited and there will be a surge or outflow of funds.Payment voucher is also called as Debit voucher.

Receipt voucher :

A Receipt voucher is utilized to record money or bank receipt. Here there is an inflow of funds.Receipt voucher is also called as credit voucher. Receipt Vouchers are of two sorts:

  • Cash receipt voucher: It indicates receipt of cash in hand .
  • Bank receipt voucher : It demonstrates receipt of a check or demand draft i.e., cash isn't received as cash in hand. Rather, the cash is credited to the bank a/c of the assessee.

Transfer Voucher :

Transfer vouchers are utilized for non-money transactions. They are essentially utilized as narrative proof. e.g., Goods sold on a credit premise. In these cases, the money/bank a/c of the assessee isn't influenced. Therefore the transfer voucher is also known as non-cash voucher.

Supporting Voucher :

Supporting voucher fills in as narrative proof of the exchanges occurred previously. For instance, you can join the bill of a cost alongside the original voucher just to additionally support the essential voucher. Petroleum Bills connected to the transport vouchers is a genuine case of Supporting Voucher.


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