Case 8.1: Laramie Wire Manufacturing: Using Analytical Procedures in Audit Planning
1. The use of analytical procedures is one …show more content…
2. As we use the management assertions to account for inventory there are a lot of scenarios that must be addressed.
1. Existence or occurrence, There should be a bar code system applied to all the inventory to ensure that all the items can be easily accounted for. By doing so, the inventory will not be misplaced, and will be a lot cheaper in the long run because then the inventory won’t need to be physically accounted for. On an annual basis, certain items should be manually counted to ensure accuracy.
2. Completeness, making sure that balance sheets and proper documentation is posted and in right order. These may include, revenue recognition and inventory identification.
3. Valuation or allocation, make sure proper write-offs are accounted for and properly recorded in the balance sheet. Ensure that Laramie uses the same valuation method during its recording phase. If there needs to be items that are no longer being used, they need to be allocated to its proper place.
4. Rights and obligations, the auditor and the company have the obligation to disclose findings and proper information to the public, especially