Case 6 - Exercise 2 Lakeside Company Inventory Purchases and Cash Disbursements Transactions December 31, 2012 Audit document

No. Prepared by: Audit Team 6 Reviewed by: Reviewed by: Purchase Requisitio n Number 6702 6703 6705 6704 6706 6707 6708 6710 6709 6711 6712 Receiving Report Number 3918 3919 3920 3921 3922 3923 3924 3925 3926 3927 3928 Invoice Number 711 802 991 1261 1313 1406 1510 1616 1691 1812 2072 Check Numb er 3091 3121 3164 3203 3251 3310 3345 3397 3425 3451 3471 Check Amount $2,413.95 $523.80 $1,810.28 $2,860.03 $6,030.04 $2,577.10 $3,745.60 $354.05 $1,507.77 $11,698.8 8 $2,941.36 B L E D C Audit Procedures F F F F C G H I J

Date 8/20/0 6 8/21/0 6 8/24/0 6 8/27/0 6 8/28/0 6 9/2/06 9/3/06 9/7/06 B 9/14/0 6 9/16/0

Vendor Cypress Products Cypress Products Cypress Products Cypress Products Cypress Products Cypress Products Cypress Products Cypress Products Cypress Products Cypress Products Cypress Products

6 9/16/0 6

Cypress Products

6713

3929

2149

3510

$14,867.9 7

Audit Objectives: To verify that all merchandise that was received was properly ordered and recorded. To verify that assets and expenses are valued and classified correctly and accurately. To verify that merchandise orders are handled by procedure and cash disbursements occur accurately. Scope: a) Population- All received merchandise. b) Sample- Judgmental. Selected 12 receipts of merchandise from Inventory Departments receiving report file. Audit Procedures: Reviewed receiving reports for completeness and authorization. Refer to comments A and B. Verified that each item listed was recorded properly in the inventory purchases journal. Traced to vendor invoice and purchase requisition in Treasurers Office. Purchase requisition examined for agreement with receiving report. All agreed except C and D. Examined purchase requisition for evidence that the proper company official approved items and quantities. Thomas and Rogers signatures or initials were present in all cases except E. Examined vendor invoice for agreement with receiving report and purchase requisition concerning the quantity and description of goods received. C was an exception here. Examined vendor invoice for evidence that company employees verify prices, extensions, and footings. Markings or initials were present in all cases except for case F. Compared invoice prices with Master Price list. Exceptions were as follows: H, I, and J. Traced invoice to canceled check and matched dollar amounts, any applicable discount was recalculated. J and K were exceptions.

Comments: A. The Receiving reports do not have a place for the Vendor name. Even though must product is received from cypress, there should be a location to list alternative vendor names. B. Receiving report #3926 is not on file. The Purchase Requisition and Vendor Invoice were used to verify quantity and descriptions of items. Copies of Receiving Report were pulled from the Treasury Department and the Controllers Office. The copies of Receiving Report agreed with other documents.

C. D. E.

F. G. H. I. J. K. L.

Receiving Report #3927 did not match Purchase Requisition #6711. Inventory and accounts payable are overstated by $160.68. There was no sign of a note made on Purchase Requisition upon the clients comparison of the two. The part number of Televisions listed on the Vendor Invoice does not match up with the Purchase Requisition and Receiving Report. It is off by a single letter. Thomas verfied that this is a typo on the Vendors part. Speak with Thomas regarding procedures when merchandise is back-ordered so that same merchandise is not reordered upon notice that it is low. An additional copy of the Purchase Requisition is made at time of comparison with Receiving Report, the line with item and note about backordered items are highlighted. This is documented with other open Purchase Requisitions in Treasurers Department. Change system flowchart. Some of the Purchase Requisitions were completed by Thomas assistant Wisdon and some were approved by Rogers assistant Miller. Thomas and Rogers both verified that these signatures are authorized. Change system flowchart. Vendor invoice #1406 was not priced, footed, and extended. Client paid invoice with check without any evidence that this step had been completed. The price of part KJ32-K on Vendor Invoice does not match Master Price list. Thomas needs to update Master Price list. Price of part BV24-R on Vendor Invoice does not match Master Price list. Thomas needs to update Master Price list. The price of part PO88-Q on Vendor Invoice does not match Master Price list. Thomas needs to update Master Price list. Vendor Invoices are not being paid within 20 days, but 3/20 terms discounts are shown are used. Check #3203 is not the correct amount. Accounts payable is understated by $31.74

Audit Conclusion: Further testing is recommended in order to obtain evidence that Inventory receipts are recorded accurately and Purchases and cash disbursements are fairly stated, in all material respects.