Pasabahce Pty Ltd has engaged you to review its internal controls over the purchases, receipts, storage and issue of raw materials:

Raw materials, which consist mainly of high-cost electronic components, are kept in the locked storeroom. Storeroom personnel include a supervisor and four clerks. All are well trained and competent. Raw materials are removed from the storeroom only upon written or oral authorisation of one of the production managers.

There are no perpetual inventory records, hence, the storeroom clerks do not keep records of goods received or issued. To compensate for the lack of perpetual records, a physical inventory count is taken monthly by the storeroom clerks who are well supervised. Appropriate procedures are followed in making the inventory count.

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.

When ordered materials arrive at Pasabahce, they are received by the storeroom clerks. The clerks count the merchandise and check the counts against the supplier's bill of lading. All investors' bills of lading are initiated, dated and filed in the storeroom to serve as receiving reports.

Required

1. Identify the six (6) weaknesses in internal controls. (3 marks)
2. Explain the potential audit risks if the weaknesses identified in a) are not rectified. (6 marks)
3. For each weakness identified in a), recommend improvements in a) recommend improvements to Pasabahce's procedures for the purchase, receipt, storage and issue of raw materials. (6 marks)

Weakness	Potential risk	Recommended improvement

Use the following table format in your response