You are the auditor of Fenton Electronics Ltd., which has recently installed a computerized bar code system to record goods received, sales, and inventory quantities. The company is a retailer of electrical products.

1. When the goods are received, the receiving department:

• Either reads the bar code on the box containing the product or inputs the bar code number manually;

• Minputs the number of items received (e.g., a box may contain 100 CDs) and adds the quantity of items received to the quantity of inventory recorded on the computer

2. When goods are sold to a customer, the bar code of the product is either read or input manually, and the computer produces the sales invoice using the selling price of the product, as recorded on the computer’s standing data file. The quantity of items sold is deducted from the inventory quantity recorded on the computer.

3. Periodically, the inventory is counted and these counts are compared with those on the computer. The inventory quantities on the computer are amended when significant differences are found.

4. The system allows:

• Details of new products and the selling prices of products to be added or amended

• Inventory quantities to be amended from differences found at the inventory count

• Special prices to be charged to customers (e.g., when the product is damaged or discontinued)

The main products the company sells are:

• Slow-moving products, such as televisions, video recorders, digital cameras, and audio equipment

• Fast-moving, low-value products, such as batteries, blank CDs, and DVDs

Required

a. Describe the edit checks that should be incorporated into the computer system to ensure that details of goods received are correctly entered into the computer.

b. i. Suggest how often inventory should be test-counted.

ii. Describe the procedures the company should carry out to ensure the inventory quantities in the computer system are accurate.

c. Describe the controls that should be used to ensure that the prices of the products on the computer file and on the products in the store are correct.