Customer Signature

Pear International Co (Pear) is a manufacturer of electrical equipment. It has factories across the country and its customer base includes retailers as well as individuals, to whom direct sales are made through their website. The company’s year end is 30 September 2012. You are an audit supervisor of Apple & Co and are currently reviewing documentation of Pear’s internal control in preparation for the interim audit.

Pear’s website allows individuals to order goods directly, and full payment is taken in advance. Currently the website is not integrated into the inventory system and inventory levels are not checked at the time when orders are placed.

Goods are despatched via local couriers; however, they do not always record customer signatures as proof that the customer has received the goods. Over the past 12 months there have been customer complaints about the delay between sales orders and receipt of goods. Pear has investigated these and found that, in each case, the sales order had been entered into the sales system correctly but was not forwarded to the despatch department for fulfilling.

Pear’s retail customers undergo credit checks prior to being accepted and credit limits are set accordingly by sales ledger clerks. These customers place their orders through one of the sales team, who decides on sales discount levels.

Raw materials used in the manufacturing process are purchased from a wide range of suppliers. As a result of staff changes in the purchase ledger department, supplier statement reconciliations are no longer performed. Additionally, changes to supplier details in the purchase ledger master file can be undertaken by purchase ledger clerks as well as supervisors.

In the past six months Pear has changed part of its manufacturing process and as a result some new equipment has been purchased, however, there are considerable levels of plant and equipment which are now surplus to requirement. Purchase requisitions for all new equipment have been authorised by production supervisors and little has been done to reduce the surplus of old equipment.

Required:

(a) In respect of the internal control of Pear International Co:

(i) Identify and explain FIVE deficiencies;

(ii) Recommend a control to address each of these deficiencies; and

(iii) Describe a test of control Apple & Co would perform. to assess if each of these controls is operating effectively. (15 marks)

(b) Describe substantive procedures you should perform. at the year end to confirm each of the following for plant and equipment:

(i) Additions; and

(ii) Disposals. (4 marks)

(c) Pear’s finance director has expressed an interest in Apple & Co performing other review engagements in addition to the external audit; however, he is unsure how much assurance would be gained via these engagements and how this differs to the assurance provided by an external audit.

Required:

Identify and explain the level of assurance provided by an external audit and other review engagements. (3 marks)

Pear’s directors are considering establishing an internal audit department next year, and the finance director has asked about the differences between internal audit and external audit and what impact, if any, establishing an internal audit department would have on future external audits performed by Apple & Co.

Required:

(d) Distinguish between internal audit and external audit. (4 marks)

(e) Explain the potential impact on the work performed by Apple & Co during the interim and final audits, if Pear International Co was to establish an internal audit department. (4 marks)

According to the article, what should customers be asked to do before signing a document?

A．To read the fine print.

B．To call your lawyer for advice.

C．To have your parent or spouse sign with you.

D．To ask the salesman for their signature too.

A.Machinesignature

B.Customernumber

C.Sitelocation

D.Customercontactnumber

A bank manager speaks

My name is Jane Carson and I'm the manager of a savings bank in Portland, Oregon. My bank is open every day from 8: 30 in the morning until 4: 00 in the afternoon. On Fridays the bank remains open until 6:30 in the evening.

Friday is our busiest day. Many people get their paychecks on Fridays and they come into deposit them. I find that on Fridays I have to keep six windows open all day long. My bank tries very hard to reduce the amount of time that customers have to waif for service. We have many signs to remind people that they need their passbooks for all transactions and that they must fill out their deposit of withdrawal slips completely. If our depositors cooperate with us we can accommodate them with as few delays as possible.

Of course, people do forget. The tellers inform. me that many customers still forget to endorse their checks or try to open or close joint accounts with the signature of only one of the parties. But I hope that my program of information for customers will reduce such delays.

Banking has changed a lot in recent years. Computers now do much of the work that the tellers used to do. As computers improve, they are able to accomplish more difficult tasks and they help us serve our customers better.

Another important change in banking, especially for savings banks, are the many different term deposit accounts that are now available to our customers. Since these certificates of deposit offer very high interest rates they help attract depositors to our bank. I make sure that my staff always has the latest information about these accounts so that they can advise our depositors correctly.

My bank is not a very large bank. The total of our current assets and fixed assets comes to 15 550 000 dollars. I'm proud of our balance sheet. Although some banks across the country are having difficulties, my bank has more assets than liabilities. We are solvent and growing. The number of customers we serve has increased this year and I expect that it will continue to grow in the future.

Comprehension check

State whether each sentence is true or false based on the reading.

Jane Carson's bank closes at 3: 00 p. in. on Fridays.

A．True

B．False

A credit card is a plastic card (or its equivalent) to be used upon presentation by the cardholder to obtain money, goods, or services, possibly under a line of credit established by the card issuer. The cardholder is billed for any outstanding balance.

Credit card customers are given a credit limit on the credit card account and can buy goods and services up to this amount. Normally, banks will set different credit lines to the different groups of cardholders. Every time cardholder uses a credit card for purchasing, he/she must sign a sales slip in the presence of the seller, and the signature is then compared to the signature on the card. Copies of the sales slips have the details of the card and they also show the details and amount of the sale.

Each month the cardholder receives a statement from the bank which details all the trans- actions in the month, together with the total amount outstanding and any minimum amount that needs to be paid. When the full balance is not settled each month, the cardholder is charged a compound interest ( say 0. 05% ) on the outstanding balance , and this is supposed to provide the bank with a main source of income ( although in China , this revenue is still low because people are reluctant to run into debt) . Other two major sources of credit card services are the annual fee from the cardholders and the percentage of the sales revenue as the commission paid by the seller.

A credit card is a plastic card and the like to be used to obtain money, goods, or services and an overdraft is not allowed.

A．Right

B．Wrong

C．Doesn't say