Brown Co Case Study - Accounting Assignment Help

Assignment Task:

Task

The task is to identify the test of controls and substantive procedures of the inventory, wages and accounts payables. 

Aim of the assessment

The individual assignment assesses students’ knowledge and application of audit procedures. 
Learning outcomes covered in this assignment 
L/O 3 Apply auditing standards in the auditing process, using professional judgment. 
Process and instructions 
1. Answer ALL questions. 
2. Please write clearly. 
3. This is an individual assessment and must be your own work. 
4. All submissions must be in MS Word Format, and use Times New Roman fonts with formatting of 12-point font, 1.5 line spacing and should be no more than 1,500 words. 
Tests of controls & substantive tests of transactions
Section 01: Wages 
Brown Co is a medium-sized manufacturing company in New Zealand employing 50 workers. Brown Co is currently reviewing its wages systems within the company. The following information is available concerning the wages systems: 
1. Hours worked are recorded using a fingerprint system. 
2. On arriving for work and at the end of each day’s work, each worker enters their unique employee number on a keypad. 
3. The supervisor authorise the payroll. 
4. The supervisor has a record of all employee numbers and can issue temporary numbers for new employees. 
5. Any overtime is calculated by the computerized wages system and added to the standard pay. 
6. The two staff in the wages department make amendments to the computerized wages system in respect of employee holidays, illness, as well as setting up and maintaining all employee records. 
7. The computerized wages system calculates gross pay, deducts taxes and calculates net pay. 
8. Finally, a list of net cash payments for each employee is produced. 
9. Wages for employees are paid via direct credit to each employee’s bank account by a staff member. 
Required 
(i) Identify and explain deficiencies in Brown Co's wages system? 
(ii) For each deficiency, suggest and briefly explain one internal control that would overcome the deficiency. 
Section 02: Accounts payables 
Assume you are the audit senior in charge of the audit of Metco, a company that has been in the business for over 50 years. Metco Co manufactures and sells furniture directly to the end customer. The company's year-end is 31 December. Trade payables are shown on Metco Co's statement of financial position as follows. 
2019 2018 $ $ Trade payables 567,000 974,564 
Required (a) List the substantive audit procedures that you should undertake in the audit of accounts payables of Metco Co for the year ended 31 December 2019. 
(b) For each procedure listed in (a) above, explain the purpose of that procedure.
Section 03: Inventory 
South City is a construction company which builds houses, offices and hotels. Materials (cement, bricks, etc...) are purchased from a large number of suppliers. As a member of the audit team, you are required to attend the inventory count of South City. On the day of the inventory count, you attended the warehouse premises of South City and observed the following activities: 
• Pre-numbered count sheets were being issued to the client's staff carrying out the count. The count sheets showed the inventory ledger balances for checking against physical inventory. 
• All count staff were warehouse staff and they were counting in teams of two. 
• Information was recorded on the count sheets in pencil so amendments could be made easily as required. 
• At the end of the count, all count sheets were collected and the numeric sequence of the sheets checked; the sheets were not signed. 
Required 
(i) In respect of your attendance at South City Co's inventory count, state one test of control and one substantive procedure that you should perform. 
(ii) List four audit procedures that an auditor will normally perform prior to attending the client's premises on the day of the inventory count. 
(iii) List two deficiencies in the control system for counting inventory at the store and state how that deficiency can be overcome.
 

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