problem 1: UTM Bar Chocolates limited employs 10 salespeople in the Mauritius, each with a defined geographical area to cover. Each and every salesperson is supplied with a new car, changed every 4 years. At the end of each week, each sales person submits a claim on a pre-printed form for expenditures with supporting vouchers. Expenses are on petrol, repairs and servicing of the car, lunches and entertaining. Each claim is scrutinized by Mr. Jones who is the chief accountant of company. He confirms that the claims are supported by vouchers. He clears any inconsistencies with the salespeople concerned and make out cheques for signature by two directors of the company. The net amount paid out for salesperson’s expenditures by the company throughout the year ended 30 June 2008 was Rs. 3,200,000. The company made a profit in that year of Rs. 15 million.
a) Describe the shortcomings of this system and propose ways of enhancing the system.
b) describe tests of control and list the test of control which the auditor would perform on this system.
c) describe the substantive procedures that the auditor would function on the item salesmen’s expenses.
problem 2: Internal control for purchase system comprise control objectives, control procedures and test of control.
a) What are the control objectives for the purchase of goods by a business?
b) What are the substantive tests to be applied on the purchase?