21-21 (OBJECTIVES 21-3, 21-5) You are the audit senior responsible for the group audit of YourSale Ltd, an online clothes retailer operating around South East Asia. Your team is concentrating on the audit of inventory which constitutes about 35% of net assets in the company. The company deals in designer pret-a-porter (which retails from USD900 per outfit) and low end clothing (which retails for USD5 to USD 50 per outfit). Your Sales operates a central distribution center in Subang Jaya, Malaysia and coun- try based distribution centers in Jakarta, Hanoi, Manila and Yangon. Orders are made on line at the YourSales website. Customers would pay in their local currencies to the bank account in Malaysia. The distribution center would dispatch to the country based distri- bution centers every Monday the orders for the week. The distribution centers would dis- patch the orders by courier to the customers. All accounting (Including accounts of the country based distribution centers) are prepared in Malaysia. Before the Subang Jaya center dispatches the orders to their country based distribution centers, the store keeper would count the items dispatched and key it into the ERP system. The staff at Subang Jaya would pack in smaller packets the orders are required by the cus- tomers. The packets would be kept in large courier boxes and the dispatch would be sealed. All relevant customs documentation would be generated. DeeEdge Courier would pick up the dispatch. When the dispatch arrives at the distribution centers, the clerks would open the cou- rier boxes, count the number of orders in the box and arrange for delivery of the orders. The clerks would not open and count the individual orders as the packages are sealed. Cus- tomer may return the designer prt-a-porter within 14 days to the country distribution centers. The returns would be sent to Subang Jaya. Upon receipt of the returns the finance department would process the refunds. Low end clothing cannot be returned. Every quarter the central distribution center would be shut for a physical stocktake. No stock take is performed at the country distribution centers as the centers are not sup- pose to keep any stock. All dispatches received must be delivered to the customer within 24 hours of receipt from Subang Jaya. Identify the internal controls in YourSales inventory and warehousing cycle. For each control identified, list a corresponding test of controls that can be used to test the effec- tiveness of internal controls over inventory. 21-21 (OBJECTIVES 21-3, 21-5) You are the audit senior responsible for the group audit of YourSale Ltd, an online clothes retailer operating around South East Asia. Your team is concentrating on the audit of inventory which constitutes about 35% of net assets in the company. The company deals in designer pret-a-porter (which retails from USD900 per outfit) and low end clothing (which retails for USD5 to USD 50 per outfit). Your Sales operates a central distribution center in Subang Jaya, Malaysia and coun- try based distribution centers in Jakarta, Hanoi, Manila and Yangon. Orders are made on line at the YourSales website. Customers would pay in their local currencies to the bank account in Malaysia. The distribution center would dispatch to the country based distri- bution centers every Monday the orders for the week. The distribution centers would dis- patch the orders by courier to the customers. All accounting (Including accounts of the country based distribution centers) are prepared in Malaysia. Before the Subang Jaya center dispatches the orders to their country based distribution centers, the store keeper would count the items dispatched and key it into the ERP system. The staff at Subang Jaya would pack in smaller packets the orders are required by the cus- tomers. The packets would be kept in large courier boxes and the dispatch would be sealed. All relevant customs documentation would be generated. DeeEdge Courier would pick up the dispatch. When the dispatch arrives at the distribution centers, the clerks would open the cou- rier boxes, count the number of orders in the box and arrange for delivery of the orders. The clerks would not open and count the individual orders as the packages are sealed. Cus- tomer may return the designer prt-a-porter within 14 days to the country distribution centers. The returns would be sent to Subang Jaya. Upon receipt of the returns the finance department would process the refunds. Low end clothing cannot be returned. Every quarter the central distribution center would be shut for a physical stocktake. No stock take is performed at the country distribution centers as the centers are not sup- pose to keep any stock. All dispatches received must be delivered to the customer within 24 hours of receipt from Subang Jaya. Identify the internal controls in YourSales inventory and warehousing cycle. For each control identified, list a corresponding test of controls that can be used to test the effec- tiveness of internal controls over inventory
