Dharma 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.
Explain what further action the auditor should take in response to the errors and control weaknesses
identified. Justify your response.
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;