Question

Darwin Pharmaceuticals Pty Ltd (DPPL) imports a number of pharmaceutical products. In order to hedge its foreign currency transactions, DPPL entered into a number of forward rate agreements this year. Prior to this time DPPL had had little exposure to derivative instruments, but a series of bad experiences resulting from fluctuating exchange rates convinced the company that a hedging strategy was necessary. During planning for the audit of DPPL, the company’s hedging arrangements were identified as inherently risky and increased testing was carried out in this area. A number of small errors were noted in accounting for hedge transactions, but there did not appear to be any material errors and as such no adjustments were made. A review of the audit file suggests that the errors noted were a result of inexperience and poor controls in the area. While all of the errors were brought to the attention of the treasurer, who is responsible for the company’s hedging strategy, no further action has been taken to date.
REQUIRED:
Outline what further action the auditor should take in response to the errors and control and control weaknesses identified.justify your response

Answer 1

Inspecting is an autonomous examination work built up inside an association to look at and assess its exercises as a support of the association. The target of evaluating is thusly to help individuals from the association in the successful release of their obligations. In this situation, the reviewer ought to perform underneath obligations to gauge the seriousness of the blunders and controls shortcomings recognized and distribute the report according to the Auditing standards:

Decide if the current arrangement of controls is in concordance with the structure of the association. Beyond what many would consider possible keeping the controls inside the working capacities goes about as a savvy measure.

Survey each control and break down them as far as expenses and advantages;

Audit the dependability and uprightness of budgetary and working data and the methods used to distinguish measure, arrange, and report such data.

Audit the frameworks built up to guarantee consistence with those approaches, plans, systems, laws, and directions which could significantly affect activities and reports, and ought to decide if the association is in consistence.

Audit the methods for defending resources and, as fitting, confirm the presence of such resources. The target of the administration is to guarantee that benefits are sensibly and sufficiently ensured against misfortune and that they are legitimately overseen and represented.

Audit activities or projects to find out whether results are reliable with set up targets and objectives and whether the tasks or projects are being done as arranged.