Learning Objective:
To apply the knowledge of audit procedures in a given scenario for testing sales and purchases system
Case:
Sher Sugar Mills Limited (SSML) is a large manufacturer of sugar in northern region of the country. M/s Professional Chartered Accountants Associates (PCAA) is carrying out final audit of the accounts of SSML for the year ended 31 March, 2013. PCAA - going to attend the AGM in June 2013, are now commencing the audit of purchases and sales system and corresponding personalledgers.
SSML’s record is computerized which produces following monthly reports:
a) A list of transactions for the month
b) An aged list of balances
c) Customer/vendor wise account statement showing all outstanding bills irrespective of age.
No serious errors were found during the audit (interim) tests carried out in September 2012. Therefore, a strong system of internal control exists in the sales and purchases system.
Required:
Which type of confirmation will be used by the PCAA to verify the receivables and payables ledger balances shown by the SSML at the year-end? Justify your answer with logical reasons.
Note:
Marks will be given for accuracy of information, logical organization of argument and correct use of language. Limit your comment to maximum 150 words.
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