ABC Sdn Bhd manufactures electronical equipment such as fridges, microwaves, washing machines and other similar domestic appliances using parts purchased from a large number of suppliers. For the audit of the financial statements ending 31 December 2018, you have been assigned to test the purchases system and will be attending the inventory count.

Procurement and purchases system

The store manager, Ahmad monitors the inventory level of the parts used in the manufacturing process. If any the number of parts falls below the re-order level, he sends an email to the purchase department stating the part required and the quantity to order. A copy of this e-mail is stored in Ahmad's computer.

Upon receiving the email, the purchase department staff will place an order with the authorised supplier of that part. This will be done via a written purchase order which is signed off by the Purchase Manager, Ms Adila who checks the order against the copy of the email sent by Ahmad. A copy of the purchase order is filed by the purchase department and another copy is provided to the store where goods are received. The order is identified by a unique order number.

When goods are received at the store, the stores clerk, Ms Serina checks the goods received to the purchase order and delivery note to ensure that the goods were in fact ordered by ABC Sdn Bhd. (Delivery is refused where goods do not have a delivery note.) She checks the quantity and quality of goods received before signing off on the delivery note. She then generates a goods received note providing details on goods received which is signed off by the store manager.

The perpetual stock system updated to show the receipt of inventory. The physical goods are added to the parts store and the goods received note is stamped with the order number and is filed in the stores department, and one copy sent to accounts department.

The supplier sends a purchase invoice to the accounts department. On receipt of the invoice, the accounts clerk checks the order database, matches the invoice details with the purchase order and goods receive note and stamps the invoice if these three documents 'match'. The invoice is then sent to the Accounts Manager, Mr Faizal for approval before invoices are recorded in the accounting system (payables ledger) and payment is issued to the suppliers.

Required:

1. Describe EIGHT tests of controls that you may want to carry out on the purchases system of ABC Sdn Bhd, explaining the reason (objective) for each procedure.

Note: Present answers using a table format

2. Explain the audit procedures and work you will carry out prior to the start of the inventory count AND during the inventory count.