Question

1. Audit Planning - Purchases Transaction Cycle

The internal auditor of Book Worm has just completed the annual planning meeting of the Audit Committee and has agreed to the following objectives for the following financial year:

1. To coordinate a review of the Purchasing and Accounts Payable functions, which will complement the external auditor's review of trade creditors and accrued charges.
2. To perform an operational audit of the Purchasing function.
3. To perform a review of inventory levels and the identification of the extent of any slow moving and obsolete inventory holdings
4. To review the levels of risk relevant to the inventory levels in each store and the warehouse.

The purchasing department consists of the following:

• A supply manager, reporting to the managing director.
• A purchasing officer, reporting to the supply manager.
• An administrative support supervisor, who reports to the purchasing officer.
• Two administrative support officers, reporting to the administrative support supervisor.

Required:

2. Develop a plan to identify slow moving inventory items and the procedures to be followed.

Answer 1