Question
As the auditor for Aspen, Inc., you are reviewing the client's internal controls over purchasing, receiving, storage, and issuance of raw materials. You have compiled
As the auditor for Aspen, Inc., you are reviewing the client's internal controls over purchasing, receiving, storage, and issuance of raw materials. You have compiled the following observations that describe Aspen's procedures: 1. Raw materials, which consist mainly of high-cost electronic components, are kept in a locked storeroom. Storeroom personnel include a supervisor and four clerks. All are well-trained, competent, and adequately bonded. Raw materials are removed from the storeroom only on written or oral authorization of one of the production managers. 2. There are no perpetual inventory records; therefore, the storeroom clerks do not keep records of goods received or issued. To compensate for the lack of perpetual records, inventory is counted monthly by the storeroom clerks, who are well-supervised. Appropriate procedures are followed in making the inventory count. 3. After the physical count, the storeroom supervisor matches quantities counted against a predetermined reorder level. If the count for a given part is below the reorder level, the supervisor enters the part number on a materials requisition list and sends this list to the accounts payable clerk. The accounts payable clerk prepares a purchase order for a predetermined reorder quantity for each part and mails the purchase order to the vendor from whom the part was last purchased. 4. When ordered materials arrive at Aspen, they are received by the storeroom clerks. The clerks count the merchandise and agree the counts to the shipper's bill of lading. All vendors' bills of lading are initialed, dated, and filed in the storeroom to serve as receiving reports.
Identify deficiencies in internal control for each of the above procedures and recommend improvements in Aspen's procedures for the purchase, receipt, storage, and issue of raw materials. (List a deficiency, then the recommended improvement.)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started