Question

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.

Answer 1

1.

Purchase Order- A case:

This is an crucial department in which all the record are to be maintained and properly Handel for the smooth running of the operations. purchase plays important role from the quotation to the receiving of the inventory and also in te return case of the stock. various steps involved during this process and for the control purpose these steps Taken for the effective result:

-The first important step is to meet with the manager by the auditor to review all the related matters regarding purchase and policies of the organization.

-Analysis the various process involved in the procurement of the inventory during the particular period and also analysis that whether purchase is made from the particular vender or there is changing of the vendor.

-For better control purchase forms are analyzed from the purchase order and audit is made on the ground by checking each section of the purchase order.

-Selection procedure of the vendor also to be analyzed and proper quotation made before the final purchase of the inventory.

-Out of the various quotation auditor check whether the order is given to the lowest quotation.

-Review the procedure by the auditor of the department and ensure that procurement process is done correctly.

-Whatever the findings by the auditor is to be complied in a systematic way and also put out the suggestion regarding the issues finding.

-Finally report is made by the auditor and given to the higher management for their review.

2.

Vouching System:

The main objective of vouching of purchase book is to observe that all the purchase invoice are entered in the purchase book and the goods which are entered in the purchase book are actually received by the business and the client pay money only for those goods which are delivered by the supplier to whom the order is given.

For vouching these are the steps to be follows:

-The auditor should observe credit purchase are recorded in purchase book.

-Invoice is prepared in the name of the client.

-Date mention under the invoice relates to audit period.

-The invoice relate to the business and purchases also to the concern.

-Responsible official must check the invoice properly and initials are made on it.

-Any trade discount is to be deducted from the purchase invoice and net amount entered.

-It is to be check that name of the supplier entered in purchase invoice are correlate to the name enter in purchase book.

-Price in the purchase invoice should be same as in the quotation.

-Quantity enter in the purchase invoice should match with the quantity recorded in the purchase book.

-It should be check that responsible officer sanction the purchase.