Case Study (1) STRAWBERRY POWER

Strawberry Power is an electricity distribution company based in Toronto. Its business is to manage the electricity assets, including poles, wires, and other equipment, that are used to deliver electricity to retail and business customers in the city.

Pole, wire, and substation maintenance and improvements are a large part of the company's operations, and teams of highly trained technicians are used for both planned work and emergency response activities. Emergency response is required when storms or fires bring down power lines, the power must be turned off at the direction of police, or the electricity supply fails for any reason.

Each team has several vehicles (vans and trucks) and uses additional heavy equipment, such as cherry pickers, cranes, and diggers, as required. Each vehicle carries a core set of specialized parts and tools, and additional items are obtained as required from storage, which is located in a large warehouse in the northern suburbs. The warehouse is staffed on a 24-hour basis to assist night maintenance (designed to minimize disruption to business customers) and emergency response.

Required

1. Make a list of the potential problems that could occur in Strawberry's maintenance and improvements program. (5 marks)
2. Suggest ways that good internal control over parts, equipment, and labour could help Strawberry avoid these problems. (5 marks)

Case Study (2)OKAWA Limited

Marty Jones has to audit the sales transactions of Okawa Ltd., which supplies tools to the mining industry.

Okawa carries a large number of different makes and models of standard mining tools. It also designs and manufactures tools for special purposes and for miners operating in difficult conditions.

The custom-designed tools are made only after a contract has been signed and a deposit received, while standard tools are supplied to regular customers on receipt of a telephone order.

Okawa's sales transactions vary from a few dollars to millions of dollars depending on the number of items sold, whether the individual items are large or small tools, and whether the tools are standard items or custom designed.

Marty is instructed to gather evidence about the sales transactions using sampling and vouching. This is explained in detail in the audit program.

Required

1. What would you expect to see in the audit program given to Marty about the (a) sample selection and (b) vouching procedures? Explain. (6 marks)
2. How could Marty use CAATs to help gather the evidence? (4 marks)