Problem: Controls pertaining to recording inventory transactions are important to assessing control risk for the existence and occurrence, completeness, valuation or allocation, and presentation and disclosure assertions for manufacturing transactions and inventories.
Question 1. How does the auditor perform a walk through of production transactions? What documents will the auditor collect? Regarding controls, what will the auditor look for?
Question 2. What control could be used to prevent or detect false work orders or fraudulent requisitions?
Question 3. What control could be used to prevent or identify the taking of company inventory by the spare parts custodian?
Question 4. Describe a control that would prevent or identify "shell company" schemes.
Question 5. What is a control that could prevent or identify fraudulent refunds of merchandise by employees?
Question 6. Do you think storage of source documents becomes an important factor when determining controls within an organization?