Posh Limited Auditing

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The adequate documents and records of audit client can also decrease the risk of misstatement, when customers make an order in store, all pre-numbered consecutively processing performed, and inventory was prepared at the time of transaction, it can reduce the chance of error. Adversely, a missing or unsigned sales invoice is not identified before preparation of inventory delivered, so it may encourage correct preparation and reduce errors.

The monthly inventory reports which are prepared by the inventory management computer system of the audit clients shows that the information technology are applied on the audit process. A efficient information processing controls can reduce the risk of misstatement on financial report, because it can enhance the accuracy of figures and reduce human error.

(3) a. The adequate documents and records is specific to the occurrence general audit objective of sales revenue account in the case, the auditor can test to inspect the signed copy by customers and signed delivery documents by the accounting staffs. If the control works, there is less need to test occurrence of sales revenue.

b. The adequate separation of duties in inventory management is specific to the net realizable value general audit objective of inventory account, the auditor can make inquiries of client personnel, it can determine the understanding of employee’s duties and his or her performance, the frequency may indicate improper application of a control as well. Meanwhile, the auditor can inquire management about estimated selling price, cost of completing and cost to make sale, which affect the inventory NRV.

(4) a. In terms of the occurrence general audit objective of sales revenue account, vouching needs to be applied for reasonably reliable evidence, which means the auditor can vouch sales journal entries to sales receipts or credit card to test the sales occurrence of audit client.

b. For the net relisable value general audit objective of inventory account, the physical inspection needs to be applied to check for conditions of inventory obsolescence, damage indicating that NRV may lower than cost.