The Internal Audit Process:
Test of Controls
AUI3702
Semester 1
Assignment 2
Unique Number: 773852
Department of Auditing
, Question 1
You are the internal auditor at Selwick Limited, a listed company selling pesticides to farmers
country wide. You are responsible for the internal audit of the sales department and
inventory during the current financial year. During your preliminary review you discovered
the following:
a) The salespersons employed by the company visit the farmers at their farms and use
tablet computers to enquire into the availability of the required stock and to place orders.
Pesticide orders can only be placed by sales staff.
b) Once an order is placed the goods are shipped to the farmer from the closest location
using any available company to perform the courier service.
c) Restocking orders are created whenever inventory levels fall below the reorder point.
d) Most of the products traded in by Selwick Limited reach obsolescence fairly rapidly.
e) The annual inventory count is performed at year-end using the services of professional
counters at all the centres country wide. The count is also supervised by the external
auditors at sites chosen by the external auditors.
f) Over the past years Selwick Limited experienced unusual write-offs on inventory as a
result of goods declared obsolete during or directly after the annual stock take.
REQUIRED:
1.1 Recommend improvements to the above system that would help Selwick Limited to
render better services to its customers and to minimize inventory losses.
As the company clearly uses a system that allows for online access, access to the
system could be further diffused to allow the farmers to at least order pesticides over
the Internet, or by phone or fax. Presently, they can only order these goods from the
sales staff that might not be sufficiently available as they visit the farmers on their farms.
The policy of using any available courier can be very expensive. Review the cost thereof
and try to negotiate a relationship with one company for a specific courier service at a
set price. This might lead to better courier services country wide at a lower cost.
The expiry dates on finished product inventory items should be closely monitored to
enable the sales staff to run special promotions on those products to ensure that as
many of the products whose expiry dates are in the foreseeable future are sold in time.
Restocking occurs automatically whenever the finished product inventory reaches a
specified level resulting in the production of unnecessary finished product inventory. A
Test of Controls
AUI3702
Semester 1
Assignment 2
Unique Number: 773852
Department of Auditing
, Question 1
You are the internal auditor at Selwick Limited, a listed company selling pesticides to farmers
country wide. You are responsible for the internal audit of the sales department and
inventory during the current financial year. During your preliminary review you discovered
the following:
a) The salespersons employed by the company visit the farmers at their farms and use
tablet computers to enquire into the availability of the required stock and to place orders.
Pesticide orders can only be placed by sales staff.
b) Once an order is placed the goods are shipped to the farmer from the closest location
using any available company to perform the courier service.
c) Restocking orders are created whenever inventory levels fall below the reorder point.
d) Most of the products traded in by Selwick Limited reach obsolescence fairly rapidly.
e) The annual inventory count is performed at year-end using the services of professional
counters at all the centres country wide. The count is also supervised by the external
auditors at sites chosen by the external auditors.
f) Over the past years Selwick Limited experienced unusual write-offs on inventory as a
result of goods declared obsolete during or directly after the annual stock take.
REQUIRED:
1.1 Recommend improvements to the above system that would help Selwick Limited to
render better services to its customers and to minimize inventory losses.
As the company clearly uses a system that allows for online access, access to the
system could be further diffused to allow the farmers to at least order pesticides over
the Internet, or by phone or fax. Presently, they can only order these goods from the
sales staff that might not be sufficiently available as they visit the farmers on their farms.
The policy of using any available courier can be very expensive. Review the cost thereof
and try to negotiate a relationship with one company for a specific courier service at a
set price. This might lead to better courier services country wide at a lower cost.
The expiry dates on finished product inventory items should be closely monitored to
enable the sales staff to run special promotions on those products to ensure that as
many of the products whose expiry dates are in the foreseeable future are sold in time.
Restocking occurs automatically whenever the finished product inventory reaches a
specified level resulting in the production of unnecessary finished product inventory. A
