Tests of Control
Anthony is the auditor of Howick Sports, a chain of sporting goods stores. He has documented the testing of inventory controls and conclusions in a work paper.
Below is an extract from Anthony’s work paper on Inventory Controls:
Inventory controller advises that no changes have been made to the computerised inventory programs during the current financial year.
Evidence: There are no documents on file authorising program changes.
Conclusion: I conclude that the inventory controller’s statement is true.
Inventory controller also advises that management did not override any controls relating to inventory.
Evidence: There are no memos or emails from management on file instructing the inventory controller to go against procedures.
Conclusion: I conclude the inventory controller’s statement is true.
Conclusion: Inventory controls have not been changed or overridden during the financial year, so the results of the control testing can be relied upon.
Required:
a) Discuss two weaknesses in the tests of inventory controls done by Anthony.
b) Explain three actions Anthony could take when the results of testing a control show that the control is not effective.