Question

Ready to Go is a producer of fine deserts and pastries. The company has operations in the U.S. and Canada. The Company currently has 52 different product lines. The accounting departments consists of a controller and two accounting staff. You obtained the following information following your inquiry with the controller:

• The warehouse maintains a copy of each prenumbered receiving report in sequential order.
• For each delivery, a prenumbered receiving report is prepared and sent to head office.
• Invoices are entered but not posted into the accounts payable subledger at head office on receipt.
• After the invoice is agreed to the receiving report, it is posted to the accounts payable subledger.
• A master price list is maintained for each of the 52 products.

Required

Prepare an audit program of at least three tests of controls to verify the related key control objective.

Answer 1

In Audit program refers to the complete sets of strategy that is prepared by an auditor. It contains in details that how the audit is to be conducted, the various checklist, the other agenda, or key focus area for an audit. Various checklists and other kinds of information.

As the Ready to Go is dealing in bakeries with 52 product lines.

The key objective of control are the following :

- Detection of error

- Identification of frauds

so the following are the test controls and related key control objectives:-

1) Three test controls:

The test controls are conducted to ensure that there is not any kind of misinformation or mismanagement is being conducted in the business operations.

1) Gathering information about the client

It is important to gather some of the information regarding the business to understand the business of clients. This is a sample kind of info that is required to be gathered.

l Nature of business: Desert and pastries.

l Divisions or categories: 52 Product lines

l Employee engaged: 2

2) Scrutiny of the document: It is important to undertake a scrutiny of the documents and the process to check the control. As in Ready Go company, the warehouse is supposed to maintain a copy of the receipt and report it to the Head Quarter then such reports must be checked to ascertain any misreporting if any.

3) Ascertain that proper control is applied

Since the reporting of receipt is an essential process so it must be ensured that proper control is being established and there is no kind of deviation and if the deviations are identified proper rectification is done. As in the given case auditor must check that number of receipts is the same in which is being reported.

Conclusion :

The above mentioned are the key test control which will help the auditor to identify any error or fraud in the operation which is the main key control objective.