Accounting
Accounting
Description: There are risks of unauthorized access to either physical inventory sites or the online inventory system. Specifically, for on-site inventory access, only authorized employees can enter the warehouse with their access cards. For online inventory access, only and employees can login and special passwords should be required. The level of confirmation required should vary according to the importance of the inventory data. This will help different people access different inventory data instead of giving everybody access to data inventory.
Test Procedures: First, the auditors can ask for a list of the employees who has the access right and compare the list with the actual access authorization. Secondly, the auditors can use a random employee’s access card to see whether it can enter the warehouse. Finally, auditors should try to access the online inventory system to check the level of confirmation.
Description: The control of timeliness could ensure that inventories are delivered on a timely basis to the appropriate levels. Specifically, the inventory should neither be oversupplied nor undersupplied. To control effective timeliness, the company should set the maximum days the inventory can sit in the warehouse to ensure they are not over delivered. Also, it needs to set a threshold which regulates the minimum amounts of goods available in the shelves to ensure no goods are undersupplied. This will help keep accounts of the inventory that are received as well as the ones that are delivered.
Test Procedures: Firstly, auditors can use the substantive testing. They can adopt CAAT such as General audit software (GAS) to calculate whether the aging of the inventory exceeds the threshold. Also, the auditors can count the physical inventories on the shelves to see if they are under the threshold amounts. Calculating whether the inventory is over or under the threshold will help the company to know how much they can order to sit in their warehouse.
Description: It is important to differentiate duties to different personnel to reduce the risk of error and fraud. For example, the persons ordering inventories, receiving and checking inventories, the person who counts the items sold and the person who issues the invoice should be separated. This will help keep every individual to a specific task and ensure that every person knows his work and if there is an error or fraud it can be easily tracked down and solved.
Test Procedures: To test this control, auditors can use the account of the employee who is responsible for checking inventories to order inventories and to see if the order can be processed. Auditors can also choose a sample to check whether each invoice is signed by the supervisor. The orders with large payments should be socially investigated.
Description: Processing data input and inventory level measured should be accurate to ensure that suppliers deliver the appropriate amount of inventory. Edit checks is a proper control in this case. It ensures that the information calculated and generated by the program must be reviewed regularly and checked before the inventory is actually ordered and delivered. This ensures that the inventories are not over-delivered or under-delivered in terms of quantity.
Test Procedures: To test this control, auditors can perform an actual physical check to see how many inventories should be ordered and compare it with the result based on the calculation of the program. The auditors can also use CAAT to calculate the total invoiced amount of goods purchased and compare the result with the balance calculated. Furthermore, unusual orders with large amounts should be checked to see whether there is a calculation problem within the system.
Description Control: One way is to compare the total cost generated by the database with the actual invoice amounts. This means that the entire inventory supplied should be correctly entered into the company’s accounting system. This will help account for every inventory in terms of quantity and price.
Test Procedures: To ensure the online system correctly recorded all the necessary information and data, the auditors can include a daily inventory order amounts and compare the results with the change of inventory levels in the accounting system. At the end of each month, the total amount of daily inventory invoice should equal the company’s inventory amount in the general ledger.
