Fliss Industries Ltd (Fliss) manufactures and sells biscuits. It has one operating site and a customer base spread across the UK. The companys yearend was 30 June 2023. It is now 1 July 2023. You are an audit manager of Perkins & Co and you are reviewing extracts of the documentation describing Flisss purchasing and payables system following completion of the interim audit.

Purchasing system

Whenever production materials are required, the relevant department sends a requisition form to the ordering department. An order clerk raises a purchase order and contacts a number of suppliers to see which can despatch the goods first. This supplier is then chosen.

The order clerk sends out the purchase order. This is not sequentially numbered and only orders above 5,000 require authorisation.

Purchase invoices are input daily by the purchase ledger clerk, who has been in the role for many years. He does not apply any information processing controls over the input process. Every week the purchase day book automatically updates the purchase ledger, the purchase ledger is then posted manually to the general ledger by the purchase ledger clerk.

Payments system

Fliss maintains a current account and a number of saving (deposit) accounts. The current account is reconciled weekly but the saving (deposit) accounts are only reconciled every two months.

In order to maximise their cash and bank balance, Fliss has a policy of delaying payments to all suppliers for as long as possible. Suppliers are paid by a bank transfer. The finance director is given the total amount of the payments list, which he authorises and then processes the bank payments.

Required:

1. Identify and explains SIX deficiencies in the system and recommend a control to address each of these deficiencies. [12 marks]

1. Describe SIX substantive procedures the auditor should perform at the final audit to obtain sufficient and appropriate evidence in relation to the bank and cash balances of Fliss Industries Co at the yearend. [6 marks]

1. In order for auditors to operate effectively and to provide an opinion on an entitys financial statements, they are given certain rights. State THREE rights of an auditor, excluding those related to resignation and removal. [3 marks]

1. Identify and describe the THREE justifications for an audit. [6 marks]

Before starting the audit, an important part of the client acceptance procedure is the Audit Engagement Letter. Identify THREE items that are included in the engagement letter that is sent to management or those charged with governance