CASE STUDY 2

Wiggins International Co (Wiggins) is a manufacturer of electrical equipment. It has factories across the country and its customer base includes retailers as well as individuals, to whom direct sales are made through their website.

The companys financial year end is 31 March 2019. You are an audit supervisor of Cavendish & Co and are currently reviewing documentation of Wiggins internal control in preparation for the interim audit.

Wiggins website allows individuals to order goods directly, and full payment is taken at the point that the order is placed. Currently the website is not integrated into the inventory system and inventory levels are not checked at the time when orders are placed.

Goods are despatched via local couriers; however, they do not always record customer signatures as proof that the customer has received the goods. Over the past 12 months there have been customer complaints about the delay between sales orders and receipt of goods. Wiggins has investigated these and found that, in each case, the sales order had been entered into the sales system correctly but was not forwarded to the despatch department for fulfilling.

Wiggins retail customers undergo credit checks prior to being accepted and credit limits are set accordingly by sales ledger clerks. These customers place their orders through one of the sales team, who decides on sales discount levels.

Raw materials used in the manufacturing process are purchased from a wide range of suppliers. As a result of staff changes in the purchase ledger department, supplier statement reconciliations are no longer performed. Additionally, changes to supplier details in the purchase ledger master file can be undertaken by purchase ledger clerks as well as supervisors.

In the past six months Wiggins has changed part of its manufacturing process and as a result some new equipment has been purchased. However, there are considerable levels of plant and equipment which are now surplus to requirement. Purchase requisitions for all new equipment have been authorised by production supervisors and little has been done to reduce the surplus of old equipment.

1.Find and explain any SIX (6) weaknesses in the systems and indicate a test of control to address each of these weaknesses