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Inventory for Lakeside

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Audit Procedures:
 Reviewed receiving reports for completeness and authorization. See comments A and B.
 Verified that each item listed was properly recorded in inventory purchases journal.
 Traced to vendor invoice and purchase requisition in Treasurer’s Office. Examined purchase requisition for agreement with receiving report as to quantity and description of goods received. All agreed except C. See also comment D.
 Examined purchase requisition for evidence that proper company official approved items and quantities. Thomas’ and Rogers’ signatures or initials present in all cases except E.
 Examined vendor invoice for agreement with receiving report and purchase requisition as to quantity and description of goods received. All agreed except C.
 Examined vendor invoice for evidence that company employees verify prices, extensions, and footings. Markings or initials present in all cases except F.
 Compared invoice prices with Master Price list. All agree except H, I, and J.
 Traced invoice to canceled check and matched dollar amounts, recalculating any applicable discount. All agreed except J. See also comment K.

Comments:
A. Receiving reports have no place for Vendor name. Most merchandise is received from Cypress Products, but if office supplies or other necessary material is received at the receiving dock, the report should have a place to indicate an alternate vendor than Cypress Products.
B. Receiving report #3926 not on file. Used Purchase Requisition and Vendor Invoice to verify quantity and descriptions of items. Obtained copies of Receiving Report from Treasury Department and Controller’s Office. Agreed with other documents. No indication as to reason for missing document was noted.
C. Receiving Report #3927 does not match Purchase Requisition #6711. Verified that Vendor Invoice and Purchase Journal match Receiving Report for all but one line item. Inventory and accounts payable are overstated by $160.68. No note was made on Purchase Requisition upon client’s comparison of the two.
D. Part number of Televisions listed on Vendor Invoice does not match Purchase Requisition and Receiving Report. Is only off by one letter and the price matches that of the item ordered and received in the Master Price list. Verified with Thomas that this is a typo on the Vendor’s part. No notation of discrepancy was made upon client’s review of Vendor Invoice.
E. Enquired with Thomas regarding procedures when merchandise is back-ordered so that same merchandise is not re-ordered upon notice that it is low. An additional copy of the Purchase Requisition is made at time of comparison with Receiving Report, highlighting line with item and note about backordered items. This is kept with other open Purchase Requisitions in Treasurer’s Department. Change system flowchart.
F. Some Purchase Requisitions were made out by Thomas’ assistant Wisdon and some were approved by Rogers’ assistant Miller. Thomas and Rogers both verified that these signatures are authorized. Change system flowchart.
G. Vendor invoice #1406 was not priced, footed, and extended. Did so now to confirm. Client paid invoice with check without evidence that this step had been done.
H. Price of part KJ32-K on Vendor Invoice does not match Master Price list. Instructed Thomas to update Master Price list.
I. Price of part BV24-R on Vendor Invoice does not match Master Price list. Instructed Thomas to update Master Price list.
J. Price of part PO88-Q on Vendor Invoice does not match Master Price list. Instructed Thomas to update Master Price list.
K. Vendor Invoices are not being paid within 20 days, but 3/20 terms shown are being taken. Informed Rogers of this. Future costs are not portrayed accurately based on current costs if Cypress Products begins to enforce terms properly.
L. Check #3203 is not for proper amount, whether or not discount is taken. This discrepancy is not caused by that noted in comment H either. Accounts payable is understated by $31.74 (aside from the discrepancy created by that noted in comment K).

Audit Conclusion:
Given the discrepancies described above, further testing is recommended in order to obtain evidence that Inventory receipts are recorded accurately and Purchases and cash disbursements are fairly stated, in…...

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