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4 views2 pages

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Report to management

Board of directors

Greystone Co

Dear Sirs,

Audit of Greystone Co for the year ended 30 September 20X0

Please Aind enclosed the report to management on deAiciencies in internal control


identiAied during the audit for the year ended 30 September 20X0. This appendix to this
report considers deAiciencies in respect of purchasing system and recommendations to
address those deAiciencies.

Please note that this report only addresses the deAiciencies identiAied during the audit
and if further testing had been performed, then more deAiciencies may have been
reported.

This report is solely for the use of management and if you have any further questions,
the please do not hesitate to contact us.

Yours faithfully,

An audit Airm

Appendix

Control deAiciencies Control recommendation Test of control


Reviewing inventory levels Realistic reorder levels Use test data to process
as although the goods are should be established in sufAicient sales so that the
just-in-time, it can still the inventory system. inventory levels of a
take up to four weeks for When inventory is down to sample of items fall below
goods to be received in the predetermined reorder the recorder level.
store. level, the purchasing
manager should be
Without propting they may prompted to raise a
order too late and purchase order.
inventory may run out for
a period of up to four
weeks, resulting in lost
revenue.
On receipt of goods the Good received should be Observe a sample of goods
quantities received are checked on arrival for being received in the order
checked by a sales quality and quantity prior to determine whether
assistant against the to acceptance. goods are checked for both
supplier's delivery note, Signs the goods receive quality and quantity.
and then the assistant Review a sample of goods
produces a goods receive note to evidence the check. receive note for signature.
note (GRN).
Quality of goods received
is not checked.
Poor quality may be
accepted and may not be
saleable. Also, inventory
may be temporarily
overvalued.

The checked GRNs are sent A copy of the Goods Enquire the accounts clerk
to head ofAice for matching receive note should be sent as to the frequency of
with purchase invoices but to the Ainance department when Goods receive note
not send to Ainance on more regular basis, are received to assess of,
department. such as immediatey. they are being sent
promptly.
This could delay in
suppliers being paid as the
purchase invoices could
not be agreed to goods
receive note and also
recorded liabilities being
understated.

Purchase invoices and A purchasing system Process a sample of order


good received note are should be adopted which using test data. Trace the
manually matched, which allows for logging of goods order through the
is time consuming. receive note against purchasing system to
original invoices, and then verify that all appropriate
The manual processing of electronic automatic checks and authorizations
high a high volume of matching of invoices are requested by the
documents is prone to against goods receive note. system.
human error.

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