Question Five The Al-said Furniture Company is manufacturing office furniture. The process of manufacturing is started by purchasing Raw Material (Mainly Wood) from suppliers, Purchased Material are warehoused till they transfer to factory responding to manufacturing needs, while labor and overhead are added through production. You were assigned to audit purchasing cycle, first step, you should assess business risks then understand internal control. The policy of purchasing raw material is based on equal quantity each month regardless of needs, Purchased Material warehoused in underground floor without fire alarm and in bad situation. Transfer raw material to factory is based on daily needs by receiving by phone from production supervisor. Required: As an auditor of this company: 1. Assess business risk of this company regarding to nature of used raw material and nature of production (Low, Moderate, High, and Very High) then clarify your answer? 2. Assess control risk of purchasing and warehousing cycle (Low, Moderate, High, and Very High) then clarify your answer? Suggest a suitable internal control system for purchasing and warehousing cycle through transferring material to factory? Determine the required documents?
Question Five The Al-said Furniture Company is manufacturing office furniture. The process of manufacturing is started by purchasing Raw Material (Mainly Wood) from suppliers, Purchased Material are warehoused till they transfer to factory responding to manufacturing needs, while labor and overhead are added through production. You were assigned to audit purchasing cycle, first step, you should assess business risks then understand internal control. The policy of purchasing raw material is based on equal quantity each month regardless of needs, Purchased Material warehoused in underground floor without fire alarm and in bad situation. Transfer raw material to factory is based on daily needs by receiving by phone from production supervisor. Required: As an auditor of this company: 1. Assess business risk of this company regarding to nature of used raw material and nature of production (Low, Moderate, High, and Very High) then clarify your answer? 2. Assess control risk of purchasing and warehousing cycle (Low, Moderate, High, and Very High) then clarify your answer? Suggest a suitable internal control system for purchasing and warehousing cycle through transferring material to factory? Determine the required documents?
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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Transcribed Image Text:Question Five
The Al-said Furniture Company is manufacturing office
furniture. The process of manufacturing is started by purchasing
Raw Material (Mainly Wood) from suppliers, Purchased
Material are warehoused till they transfer to factory responding
to manufacturing needs, while labor and overhead are added
through production. You were assigned to audit purchasing
cycle, first step, you should assess business risks then
understand internal control. The policy of purchasing raw
material is based on equal quantity each month regardless of
needs, Purchased Material warehoused in underground floor
without fire alarm and in bad situation. Transfer raw material to
factory is based on daily needs by receiving by phone from
production supervisor.
Required: As an auditor of this company:
1. Assess business risk of this company regarding to nature of
used raw material and nature of production (Low,
Moderate, High, and Very High) then clarify your answer?
2. Assess control risk of purchasing and warehousing cycle
(Low, Moderate, High, and Very High) then clarify your
answer? Suggest a suitable internal control system for
purchasing and warehousing cycle through transferring
material to factory? Determine the required documents?
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