You are an audit senior at Thompson & Associates and have noted the following independent issues in relation to the audit of Creek Ltd: (i) The Creek company Ltd usually carried out its stocktake on balance date after it had closed its stores for the day but due to illness the stocktake was not carried out until twenty days after balance date. (ii) The audit of the accounting system found numerous severe internal control weaknesses during the interim audit . (iii) Due to increased competitive pressures, Creek Ltd has recently moved the manufacture of some of its clothing lines out of Melbourne into regional areas. While Creek Ltd saves around 20% in costs, the manufacturing process takes longer and on several occasions late delivery has resulted in lost sales. Required: Explain the impact of each of these separate issues on your assessment of audit risk, the materiality level and the audit strategy that would be adopted. Question 4 (10 marks) Retro Pty Ltd is a major .manufacturer of industrial machinery. Detailed below is a description of its purchasing and payments system. (i) When the stores department requires items to be purchased, they issue a three-part pre-numbered purchase requisition that needs to be approved by the stores manager. Copy 1 is sent to the purchasing department, Copy 2 is sent to the accounts payable department and Copy 3 is filed in the stores department. (ii) On receipt of an approved purchase requisition, the purchasing department issues a five-part pre-numbered purchase order. Copy 1 is sent to the supplier, Copies 2 and 3 are forwarded to the receiving department, Copy 4 is forwarded to the accounts payable department and Copy 5 is filed in the purchasing department. (iii) When goods are received, the receiving department logs in the shipment by stamping order received on its two copies of the purchase order, which then forms its receiving record. One copy of the receiving record is filed in the receiving department and the other is forwarded to the accounts payable department. (iv) The accounts payable department checks that there is a purchase requisition, purchase order and receiving record for each supplier invoice and then approves it for payment. (v) The accounts payable department prepares a pre-numbered disbursement voucher and forwards it along with the suppliers invoice, purchase requisition, purchase order and receiving record to the financial accountant. (vi) The financial accountant prepares a cheque for each supplier, signs the cheque and records it in the cash disbursements journal. The cheque is immediately mailed to the supplier. Supporting documentation is returned to accounts payable for filing. (vii) At the end of the month, the assistant accountant undertakes a sequence check of all accountable forms. The financial accountant receives the monthly bank statement, prepares a bank reconciliation and investigates any reconciling items. Required: a)Identify five (5) internal control weaknesses in Retros internal control concerning the purchases and payments functions. Explain why each is a weakness. b) identify a test you would carry out for each of the above weaknesses identified in part a and the assertions for the accounts you are carrying out tests for. b) identify a test you would carry out for each of the above weaknesses identified in part a and the assertions for the accounts you are carrying out tests for. b) identify a test you would carry out for each of the above weaknesses identified in part a and the assertions for the accounts you are carrying out tests for. b) identify a test you would carry out for each of the above weaknesses identified in part a and the assertions for the accounts you are carrying out tests for. b) identify a test you would carry out for each of the above weaknesses identified in part a and the assertions for the accounts you are carrying out tests for. b) identify a test you would carry out for each of the above weaknesses identified in part a and the assertions for the accounts you are carrying out tests for. b) identify a test you would carry out for each of the above weaknesses identified in part a and the assertions for the accounts you are carrying out tests for. b) identify a test you would carry out for each of the above weaknesses identified in part a and the assertions for the accounts you are carrying out tests for. b) identify a test you would carry out for each of the above weaknesses identified in part a and the assertions for the accounts you are carrying out tests for. b) identify a test you would carry out for each of the above weaknesses identified in part a and the assertions for the accounts you are carrying out tests for. b) identify a test you would carry out for each of the above weaknesses identified in part a and the assertions for the accounts you are carrying out tests for. b) identify a test you would carry out for each of the above weaknesses identified in part a and the assertions for the accounts you are carrying out tests for. b) identify a test you would carry out for each of the above weaknesses identified in part a and the assertions for the accounts you are carrying out tests for. vvv b) identify a test you would carry out for each of the above weaknesses identified in part a and the assertions for the accounts you are carrying out tests for. b) identify a test you would carry out for each of the above weaknesses identified in part a and the assertions for the accounts you are carrying out tests for. b) identify a test you would carry out for each of the above weaknesses identified in part a and the assertions for the accounts you are carrying out tests for. b) identify a test you would carry out for each of the above weaknesses identified in part a and the assertions for the accounts you are carrying out tests for. v b) identify a test you would carry out for each of the above weaknesses identified in part a and the assertions for the accounts you are carrying out tests for. b,identify a test you would carry out for each of the above weaknesses identified in part a and the assertions for the accounts you are carrying out tests for.