Bsi Case

Memo

Introduction:

Our 3 competencies are audit, financial, managerial. The audit memo, accounting issues and information system evaluation covers audit competency, the accounting Issues covers financial competency and the information system evaluation and expansion evaluation covers managerial competency.

After reviewing the information concerning BSI, we have compiled the following report. We have analyzed and assessed the purchasing and shipping/receiving system and provided recommendations. Also we have calculated the feasibility of the product line expansion and provided you with detailed suggestions on our findings.

I. Purchasing and Shipping/Receiving Assessment

Weakness and Implication:

Inventory is entered into the system at the time the purchase of goods is placed. These units have not been received from the suppliers. This causes an over statement of physical inventory and could lead to back-orders.

Recommendation:

The recording of shipments from suppliers should be transferred to the warehouse. This will ensure that product is entered into the system after it has arrived. This will create a more accurate inventory count.

Audit Procedure:

Observe receiving process and inventory management system process. Verify inventory records with physical inventory counts.

Weakness and Implication:

When orders from suppliers arrive, there is no physical check to ensure that the invoice matches what was actually received. The only verification is the invoice with the inventory recorded when the order was placed. This could lead to misstatement in the records with inventory in stock being potentially greater than or less than the inventory records. This causes the inventory management system to produce unreliable records.

Recommendation:

Shipments received should be physically checked to verify that the invoice is correct. At which point the inventory units can be entered into the system and the invoice can be forwarded to the accounting department.

Audit Procedure:

Verify that physical checks are being performed on received shipments. Ensure that inventory is not recorded when ordered.

Weakness and Implication:

Accounts payable is not recorded until the shipment is received. This does not properly reflect the timing of this liability. It is reasonably assured that you will have to make these payments when the order is placed. This causes an under valuation of A/P and delays the recognition of these liabilities

Recommendation: