Audit planning memorandum plan part. Wigila Swaiaty, a for-profit cooperative, was organized in 1954 in Gdansk,

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Audit planning memorandum — plan part.

Wigila Swaiaty, a for-profit cooperative, was organized in 1954 in Gdansk, Poland, to produce and distribute local crafts such as natural material Christmas decorations (82 per cent of sales), wood work, folk art, sculpture and embroidery.

Their sales by region are approximately 20 per cent Poland, 45 per cent Europe, 25 per cent North America, and 10 per cent the rest of the world. They sell directly to retailers in Poland and have a sales force of 10 people. Outside Poland they sell primarily to wholesalers of Christmas decorations. Their sales strategy is to increase sales of their non-Christmas decoration products overall and to increase sales to North America.

Wigila has one subsidiary company, Wigila, BV (started in 1993) in Amsterdam which is responsible for European sales. Wigila has a board of directors and an audit committee made up of outside directors. Both Gdansk and Amsterdam offices have the latest network hardware and software and Gdansk has a website on the internet. The computers run the most up-to-date versions of wordprocessor, communications, accounting and financial software.

Wigila Swaiaty’s Gadansk office has one employee who is responsible for legal matters and they use the services of a local solicitor firm Klodka & Waldemar. The company has six directors: Tom Miller, chairman and chief executive; Edward Miller, vice chairman; Doriusz Kaxzmarek and Marek Miller are directors who also work for Wigila as vice-president operations and chief executive officer of Wigila, BV, respectively. Outside directors are Paul Pollorz and Gregorz Locoski.

The market for their main product line, natural material Christmas decorations, is worldwide. Wigila’s main competitor in Poland is Gwiazdka who has 60 per cent of the market versus Wigila’s 30 per cent. Wigila market share and main competitors in their other sales area are:

(1) 11 per cent of North America, main competitor is You'lltyde with 26 per cent;

(2) 26 per cent of Europe, main competitor is Tauschung Tadesco with 14 per cent; and the rest of the world share is less than 1 per cent.

The industry has seen a rapid growth in computer usage to manage distribution and operations, but the manufacturing tools and techniques are hundreds of years old. Products are made by hand by individual craftsmen and collected by distributors such as Wigila. Unlike most distributors, Wigila is a co-operative. It is operated for profit and owned 50 per cent by the craftsmen who provide the products. There is pressure on the management to increase sales and the compensation of all executives is tied to increases in sales.

The craftsmen-owners of Wigila receive their wages based on a per-piece basis. For artfully made ‘spheres’ (the size of large apples and individually decorated) they may receive 10 per cent of the wholesale price the company charges customers. For sculpture, on the other hand, they may receive up to 40 per cent of the wholesale price. The craftsmen-owners wish the company to increase sales of non-Christmas decoration products as they have a higher profit margin for the craftsmen.

The auditor is Wieslaw Borowski, Auditor.

The firm determines that one partner, one audit manager, three audit supervisors, and 10 audit staff will require 1,000 hours audit time at Polish Zloty (zloty) 600 for partner hours, 400 for audit manager, 250 for supervisors and 150 for audit staff, Staff telephone and email numbers are provided in the audit plan.

A schedule of percentage of Revenues and Total Assets for Wigila Swaiaty and the subsidiary Wigila, BV and the percentage of proposed audit scope is shown below.

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Required
A. Based on the information above and Illustration 12.3, write the company, economy, internal factors and auditscope sections of the Borowski firm’s general audit plan for Wigila Swaiaty.
B. As part of the general audit plan, describe five audit procedures which you believe Wieslaw Borowski can perform in the accounts receivable and sales audit areas.
C. Describe what you believe will be the critical and significant audit concerns in Borowski’s General Audit Plan.

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Related Book For  book-img-for-question

Principles Of Auditing: An International Perspective

ISBN: 9780077095321

1st Edition

Authors: Rick Stephan Hayes, Philip Wallage, Arnold Schilder, Roger Dassen

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