Summary: Audit And Analysis Of Smackey Dog Food Inc.
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Smackey Dog Food Inc. Audit & Analysis
Smackey Dog Foods Inc. (SDF) was started by three sisters who had an idea for healthier, tastier dog food. SDF has been slowly expanding from the kitchen of the sister’s home to a manufacturing plant. The sisters have expanded their product and now have another choice of dog food that needs to be consumed within a few days of being produced. The sisters would like to expand their operation and need second loan from the bank. Their first loan is secured with the equipment they purchased with the first loan, now they bank is asking for an audit of the financial statements. My team at Keller CPA has been chosen to perform the audit and the information gathered will be used by the bank to either agree…show more content… Perform tests of controls and substantive tests of transactions. Before the audit team can safely reduce planned assessed control risk, they need to test the effectiveness of the controls (Arens, Elder, & Beasley, 2012). One control that can be tested for SDF is the inventory, all inventories, but specifically returned inventory. The best way to test this control would be to physically count the inventory and compare it to what the invoices say there should be. This will satisfy the existence objective. They can also observe the employees and make inquiries of the inventory process when necessary. The audit team can record the client’s recording of transactions by verifying the amounts of transactions. SDF’s Best Boy Gourmet is sold by special order through their relatively new website. The auditor will want to test the computer program to the unit selling prices on the sales invoice with an electronic file of approved prices to test the accuracy objective for sales…show more content… Auditing standards also require that they communicate certain other matters to those charged with governance upon completion of the audit. Auditors often make suggestions to management to improve performance (Arens, Elder, & Beasley, 2012). The following is a list of internal control weaknesses of SDF: 1. There is a lack of presence on the premises. Everyone takes a lunch break at the same time leaving the opportunity open for something such as theft take place. 2. Segregation of duties concerning inventory control. With a growing business, Kim should not give most or all of her time to a single project within the company. When that happens, other areas will begin to decline as a result. Kim has an assistant, Henry, who helps her maintain inventory control by preparing and approving shipments, material misstatements may be a result of this. 3. Lack of control procedures and segregation of duties when handling returned dog food has given employees opportunity to take advantage of the situation by taking food home with