Total Marks 5
Starting Date Monday, January 13, 2020
Closing Date Friday, January 17, 2020
Question Title Testing the Inventory System
Fundamental of Auditing
Covering Lecture 23-30
Topic for Discussion: “Testing the Inventory System”
Learning Objectives:To assess the knowledge related to verification approaches during audit To understand the process of testing the inventory system To know the importance of inventory documentation and record processes in the business To asses and understand the importance of control objectives while testing the inventory system during audit
ABC Chemicals – located in KTL industrial area, is one of the pioneer paint manufacturing companies in the country. Currently, it is facing liquidity issue to finance its production to increase the capacity. However, the company has plenty of inventory in its store which can be hypothecated with the bank to generate liquidity. Company’s director finance received a financial plan from his manager and approached to XYZ Bank for hypothecation against existing inventory. After negotiation, the bank agreed to provide term finance equal to 70 paisa per rupee on a markup of paisa 30 per thousand per day. However, the bank demanded a certificate on the inventory valuation by an independent auditor. ABC Chemicals with the approval of the bank has nominated you as an independent auditor.
Discuss at least four relevant “Control Objectives” which will be verified by you during this audit in order to test the inventory system of ABC Chemicals.
Important Instructions:Carefully review your GDB before submission as it cannot be replaced once it is submitted. Your discussion must be based on logical aspects of the topic requirements with proper justification. Use the font style “Times New Roman” and font size “12”. Your answer should be relevant to the topic i.e. clear and concise. Word limit for GDB is 200. Do not copy or exchange your answer with other students. Two identical / copied comments will be marked Zero (0) and may damage your grade in the course. Books, websites and other reading material may be consulted before posting your comments; but copying or reproducing the text from books, websites and other reading materials is strictly prohibited. Such comments will be marked as Zero (0) even if you provide references. You should post your answer on the Graded Discussion Board (GDB), not on the Moderated Discussion Board (MDB). Both will run parallel to each other during the time specified above. Therefore, due care will be needed. Obnoxious or ignoble answer should be strictly avoided. You cannot participate in the discussion after the due date via email. Questions / queries related to the content of the GDB, which may be posted by the students on MDB or via e-mail, will not be replied till the due date of GDB is over. For planning your semester activities in an organized manner, you are advised to view schedule of upcoming Assignments, Quizzes and GDBs in the overview tab of the course website on VULMS. As you know that load shedding problem is also prevailing in our country. Keeping in view the fact, you are advised to submit your GDB well before time without waiting for the due date. For your convenience; you have been communicated so that you can manage your activities, therefore no excuse will be entertained after due date of GDB.
SEMESTER FALL 2019
FUNDAMENTALS OF AUDITING (ACC311)
DUE DATE: 27TH NOVEMBER, 2019 MARKS: 10
The students are expected to develop an understanding on auditor’s appointment and qualification in light of Companies Act 2017.
After going through this activity, the students will be able to understand how an individual or company can be appointed as an auditor.
Following are some independent scenarios with reference to appointment & qualification of an auditor:
Barkat Enterprises (a public limited company) dissatisfied with the performance of their current auditors decided remove them. In the recent AGM of the enterprise, one of its directors, Waseem proposed his own chartered accountancy firm, running under his name as M/S Shafee & Co. as the new auditors for the enterprise. The board has approved this proposal and appointed M/S Shafee & Co as their new external auditor.
MTM, a renowned yarn manufacturing firm has recently transformed its legal status into a private limited company with paid up capital of Rs. 3.20M. After the registration, it hired a chartered accountancy firm, Nabi Associates as external auditor for the audit purpose.
Ahsan after completing his CA qualification started his own audit firm with his class mate Asghar 5 years ago. Asghar’s wife, Sara is working as a director at Ahmar & Sons (a private limited company) and holds 35% shares in it. Recently, she used her influence in the company’s board meeting to appoint her husband’s firm as the company’s external auditor.
Since the first day of December 2017, Shahbaz is running his own audit firm providing service in all walks of business including audit. On October 01, 2019 he was offered an opportunity to work as an external auditor of a limited company. He is happy for this offer as he had spent some good time of 2 years in that company as its finance manager before starting his own audit firm.
Zeeshan has been working as an employee at Hussain Limited for the last 2 years. Before this joining, he was working as an audit trainee with an audit firm registered with the ICAP. Now, he has passed all the examinations of his chartered accountancy qualification and is planning to start his own audit firm. On knowing this, his employer, Hussain Limited has offered him to work as the company’s external auditor.
Read carefully provisions of the Section 254 of the Companies Act 2017. Give your opinion, in light of the said section, on the appointments of individuals in the above scenarios as an external auditor.
24 hours extra/grace period after the due date is usually available to overcome uploading difficulties. This extra time should only be used to meet the emergencies and above mentioned due dates should always be treated as final to avoid any inconvenience.
IMPORTANT INSTRUCTIONS/ SOLUTION GUIDELINES/ SPECIAL INSTRUCTIONS
BE NEAT IN YOUR PRESENTATION
OTHER IMPORTANT INSTRUCTIONS: DEADLINE:
Make sure to upload the solution file before the due date on VULMS.
Any submission made via email after the due date will not be accepted. FORMATTING GUIDELINES:
Use the font style “Times New Roman” or “Arial” and font size “12”.
It is advised to compose your document in MS-Word format.
You may also compose your assignment in Open Office format.
Use black and blue font colors only.
Use APA style for referencing and citation. For guidance search “APA reference style” in Google and read various websites containing information for better understanding or visit http://linguistics.byu.edu/faculty/henrichsenl/apa/APA01.html
RULES FOR MARKING
Please note that your assignment will not be graded or graded as Zero (0), if:
It is submitted after the due date.
The file you uploaded does not open or is corrupt.
It is in any format other than MS-Word or Open Office; e.g. Excel, PowerPoint, PDF etc.
It is cheated or copied from other students, internet, books, journals etc. Note related to load shedding: Please be proactive
As you know that Pre Mid-Term semester activities have been started and load shedding problem is also prevailing in our country. Keeping in view the fact, you all are advised to post your activities as early as possible without waiting for the due date. For your convenience; activity schedule has already been uploaded on VULMS for the current semester, therefore no excuse will be entertained after due date of assignments or GDBs.
Quiz No.2 Total Questions : 10
Please read the following instructions carefully!
Quiz will be based upon Multiple Choice Questions (MCQs).
You have to attempt the quiz online. You can start attempting the quiz any time within given date(s) of a particular subject by clicking the link for Quiz in VULMS.
Each question has a fixed time of 90 seconds. So you have to save your answer before 90 seconds. But due to unstable internet speeds, it is recommended that you should save your answer within 60 seconds. While attempting a question, keep an eye on the remaining time.
Attempting quiz is unidirectional. Once you move forward to the next question, you can not go back to the previous one. Therefore before moving to the next question, make sure that you have selected the best option.
DO NOT press Back Button / Backspace Button while attempting a question, otherwise you will lose that question.
DO NOT refresh the page unnecessarily, specially when following messages appear
Question Timeout: Now loading next question…
If for any reason, you lose access to internet (like power failure or disconnection of internet), you will be able to attempt the quiz again from the question next to the last shown question. But remember that you have to complete the quiz before expiry of the deadline.
If any student failed to attempt the quiz in given time then no re-take or offline quiz will be held.
ACC311 Quiz 2 Solution and Discussion
Fouzia Suleman last edited by