Question

Ready to Go is a producer of fine deserts and pastries. The company has operations in the U.S. and Canada. The Company currently has 52 different product lines. The accounting departments consists of a controller and two accounting staff. You obtained the following information following your inquiry with the controller:

• The warehouse maintains a copy of each prenumbered receiving report in sequential order.
• For each delivery, a prenumbered receiving report is prepared and sent to head office.
• Invoices are entered but not posted into the accounts payable subledger at head office on receipt.
• After the invoice is agreed to the receiving report, it is posted to the accounts payable subledger.
• A master price list is maintained for each of the 52 products.

Required

Prepare an audit program of at least three test of controls to verify the related key control objective.

Answer 1

Since the Company sells 52 different product lines. the following test of contol is required:

1. maintain separate receiving register for all 52 product line with unique serial number for receipt

2. The amount and quantity as per warehouse register shall match with Invoice , otherwise it should not be sent to HO . also Invoice shall also be stamped with unique serial number to maintain the identiifcation in system

3. Once the matchig done, posting should be done to account payable with proper tracking of inventory.