As part of the interim audit, Sally Wang, the audit senior, has completed a 'walk-through' of the procedures. The following is a summary of the procedures she documented in the audit file:

1) Marama Stone, the factory manager, is responsible for initiating orders for raw materials. The orders are sent daily to Jessica Liu, the accounts payable clerk, via email as purchase orders. To place orders with suppliers, the accounts payable clerk contacts any of the approved suppliers via email.

2) Jessica may look for a new supplier if any of the approved suppliers cannot fulfil a purchase order. When she obtains a quote from a new supplier, she passes the quote and the new suppliers information to Stephanie, the financial controller, for approval. The financial controller will add the new supplier to the approved supplier list if approved. Once a supplier is approved, Jessica has permission to edit their information.

3) When goods are received in the factory warehouse, the warehouse assistant checks the suppliers delivery note against the physical stock coming in. Once it is confirmed that the order is correct, the truck driver is allowed to deliver. The warehouse supervisor initials and dates the delivery note and sends it to Jessica to update inventory records, including the journal entry.

4) Stephanie, the Financial Controller, receives all invoices. On receipt of an invoice, she checks the details against the delivery note received from the warehouse. If there are no discrepancies, she authorises payment. To ensure she doesn't double-pay, she writes the date of delivery note next to the product number on the invoice. Once paid, they are stamped PAID. She then carefully enters the journal entry checking the accuracy of numbers, ticks off the number on the invoice, and then files it. The financial controller forwards to the CEO for further authorisation any payments of over $10,000 for a single transaction.

5) Online orders are made via Fresh Fruits NZs secure website. The ordering form has several automated checks before orders can be placed, including a genuine postal address, requiring all fields to be entered, reasonableness checks (e.g., checking for order size) and secure payment via credit card. A sales order is created once the system verifies that the payment has been made.

6) Typically, Fresh Fruits NZ delivers products with payment due in 30 days. Orders are sent to the warehouse. However, in the past, the company has identified a small group of independent boutique retailers in the high-end market. Due to the precarious finances, Fresh Fruits NZ makes deliveries to these retailers the night before but based on cash on delivery (COD), an electronic cash payment. The banking clerk, Stephen Miles, checks this payment and calls the delivery company in the morning to confirm it.

7) Stephen and Jessica carry out a complete bank reconciliation for the previous week each Monday morning.

Required: 2a). Identify FIVE control weaknesses in the inventory system. Explain how each weakness may affect the financial statements and identify the audit procedures to address each control weakness.

Identify a control weakness	How the weakness may affect financial statements	Audit procedures to address the control weakness
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2b). Identify FOUR control strengths in the inventory system and explain why each control is a strength. For each control strength, identify audit procedures to test the effectiveness of control.

Identify a control strength	Explain why it is a strength	Audit Procedures to test the control
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