ACCT864: Mini Audit Case Study - Accounting and Finance Assignment Help

Assignment Task:

Task:

Question 1:
Explain the steps and highlight the issues that your firm should consider before accepting the appointment as the auditor of SJ Corner. (5 marks)
Question 2:
Presuming that your preliminary assessment of SJ Corner led to the decision to accept this audit client, you are now planning the audit of SJ Corner. Based on the background information that you obtained above:

Discuss SIX potential issues which may indicate risks of material misstatement and any concerns (if any) that you would consider when planning for this audit engagement. Give brief reasons why you think the issues and concerns you have identified may require attention during the audit. (9 marks)

Question 3:
Read ISA (NZ) 520: Analytical Procedures
Calculate the following ratios for SJ Corner using the draft financial information provided to you by Sophie Corner-Rendle, and identify accounts and assertions are at a high risk of misstatements and provide reasons for your answer. (15 marks)
• Accounts Receivable Turnover in Days
• Inventory Turnover in Days
• Accounts Payable Turnover in Days
• Asset Turnover ratio
• Debt/Worth Ratio
• Quick ratio
• Current ratio
PART 2: UNDERSTANDING THE INTERNAL CONTROL STRUCTURE AND ASSESSING CONTROL RISK
SJ Corner’s customers are wholesalers and retailers who make an order by using the following means:
For retailers:
1. Customers visit SJ Corner’s website to select the products they require. The website ordering system accesses the inventory master file to obtain the details and availability of products. Each product is in a box of 24 items. When the customer chooses a product, order information including price, item description and quantity (number of boxes, maximum 15 boxes per order) required are displayed on the customer’s computer screen, together with discount offer if the customer chooses other products which are under promotion. Once the customer clicks “confirm”, the order information is stored in the ‘orders pending’ file.

2. Online authorisation of credit card details is obtained from the customer’s credit card company automatically by SJ Corner’s online selling systems. Following the payments, the sale amount is transferred to the company’s sales system. At the end of each day the total from the sales ledger is transferred to the general ledger.

3. Then, order details are transferred to a ‘goods awaiting despatch’ file and allocated a unique order reference code which can be accessed by warehouse and shipping clerks. The warehouse clerk, Tom Wilson, accesses the system using a tablet (e.g. iPad or windows surface) in view- only mode to view the order information. Tom then picks up the goods, updates the inventory system and print out two copies of a packing slip. One is accompanied the goods to be placed in a room called “customers to pick up” or transferred to shipping department.

Question 4:
Perform FIVE tests of controls on the sales and despatch system for retailing at SJ Corner and explain the reason for each test. (10 marks)

Question 5: Discuss the control strengths and weaknesses of the sales and cash receipts system.
(16 marks)
a) Identify FOUR strong controls in the above system For each strong control:
I. Explain what the purpose of the control (i.e what does the control prevent or detect).
II. What tests of controls would be used to verify whether the control has been carried out effectively throughout the financial year.
b) Identify TWO control weaknesses in the above system For each weak control:
I. Explain which account and assertion(s) are effected as a result of the control weakness
II. For each control weakness, provide a relevant audit procedure (audit test) to reduce the risk of material misstatement to acceptable level.

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