Brett Baker is the owner of three brake speciality shops in Brisbane city, Toowoomba and Ipswich. His stores are called Baker Brakes. The stores carry speciality brakes, oils and brake seals. Brett wants to expand with another store on the Gold Coast and he approached the Bower Bank to borrow $250,000 to establish the new store. The bank has requested that he provides audited figures of his inventory at 30/10/2023.
Stan South is the purchasing officer. He maintains a central store of inventory in a secure room at the Ipswich store. Staff at the Brisbane city and Toowoomba stores email him their weekly sales figures for the prior week on Monday morning. Colin then sends out stock to replace the stock sold in the previous week, on Monday afternoon. Hence, the stock held at each store is constant at the start of each week. Frank checks the shipments of brake kits, filters and oils when they are received. When brake kits, filters and oils are received from suppliers a bar code is attached and the brake kits, filters and oils are then stored in the storeroom. A perpetual inventory system is used for all stock. A stocktake is conducted at the end of the financial year.
Brett states sales are in the order of $3.809 million. Sales are expected to be a 100% markup on cost of goods.
You are provided with one Excel workbook, which contains two spreadsheets with details of inventory and sales:
The StockRecords file contains the following information:
The StockTake file contains the following information:
1. You and your team members attend the stocktakes at the three locations. Explain what your team will do at the stocktakes to test the following assertions regarding inventory (assume that you have access to any records/documents required). Include in your explanation the extent of testing your team will undertake:
a. existence (7 marks)
b. completeness (7 marks)
c. valuation
d. cut-off
(can I please have references if possible in Harvard AGPS style)
Stocktakes are a crucial aspect of ensuring the accuracy and reliability of a company’s financial statements, especially when dealing with inventory. In the case of Brett Baker’s Baker Brakes, we will outline the procedures that our team will undertake during the stocktakes at the Brisbane City, Toowoomba, and Ipswich locations to test the assertions regarding inventory, including existence, completeness, valuation, and cut-off. These procedures are essential for maintaining the integrity of financial reporting and providing accurate information to the Bower Bank for the loan application.
The existence assertion focuses on verifying that the inventory items recorded in the books actually exist and are physically present at the respective locations. To test this assertion, our team will:
Physically count the inventory items: Our team will count the physical inventory items at each location during the stocktake. This involves cross-referencing the physical count with the recorded quantities in the StockRecords and StockTake files.
Compare stock records: We will compare the StockRecords in Excel with the actual inventory present during the stocktake to identify any discrepancies. Any missing items or items not recorded in the system will be noted and investigated further.
Review supporting documents: We will examine purchase invoices, delivery receipts, and supplier agreements to confirm the acquisition of inventory items. This will provide evidence of the existence of the items.
Trace inventory to sales: Our team will trace a sample of recently sold inventory items back to the physical inventory at each location to ensure that they indeed existed before being sold.
The completeness assertion aims to ensure that all inventory items are accurately recorded and that no items are omitted. To test this assertion, our team will:
Reconcile stock counts: We will reconcile the physical counts from the stocktake with the recorded quantities in the StockRecords and StockTake files. Any discrepancies will be investigated to identify missing or unrecorded items.
Inspect receiving reports: We will review receiving reports and compare them to the inventory records to ensure that all inventory received from suppliers is properly recorded.
Examine sales records: Our team will examine sales records and compare them to inventory records to verify that all items sold are accurately deducted from the inventory. Any discrepancies will be investigated.
Review documentation: We will inspect documentation related to inventory adjustments, returns, and transfers to ensure that they are properly recorded in the inventory records.
c. Valuation: The valuation assertion involves ensuring that inventory is accurately valued in the financial statements. To test this assertion, our team will:
Review cost data: We will verify the cost of goods sold (COGS) calculations by examining purchase invoices, supplier agreements, and any applicable discounts or allowances.
Calculate ending inventory: Our team will calculate the ending inventory value using the perpetual inventory system and compare it to the recorded value in the StockRecords file.
Inspect pricing consistency: We will ensure that the selling prices are consistent with the selling price recorded in the inventory records. Any discrepancies will be investigated.
d. Cut-off: The cut-off assertion is concerned with ensuring that transactions are recorded in the correct accounting period. To test this assertion, our team will:
Examine shipping and receiving documents: We will review shipping and receiving documents to confirm that inventory transactions are recorded in the correct period, especially during the year-end stocktake.
Analyze sales records: We will analyze sales records to verify that sales transactions are properly recorded in the correct accounting period.
Cross-reference inventory records: Our team will cross-reference inventory records with sales and purchase records to identify any potential cut-off issues.
In conclusion, our team will conduct a thorough stocktake at each of Brett Baker’s Baker Brakes locations to test the assertions regarding inventory existence, completeness, valuation, and cut-off. This comprehensive approach will ensure the accuracy and reliability of inventory-related information, which is essential for Brett’s loan application to the Bower Bank. By following these procedures, we aim to provide assurance that the inventory figures presented to the bank are accurate and supported by sufficient evidence.
As a renowned provider of the best writing services, we have selected unique features which we offer to our customers as their guarantees that will make your user experience stress-free.
Unlike other companies, our money-back guarantee ensures the safety of our customers' money. For whatever reason, the customer may request a refund; our support team assesses the ground on which the refund is requested and processes it instantly. However, our customers are lucky as they have the least chances to experience this as we are always prepared to serve you with the best.
Plagiarism is the worst academic offense that is highly punishable by all educational institutions. It's for this reason that Peachy Tutors does not condone any plagiarism. We use advanced plagiarism detection software that ensures there are no chances of similarity on your papers.
Sometimes your professor may be a little bit stubborn and needs some changes made on your paper, or you might need some customization done. All at your service, we will work on your revision till you are satisfied with the quality of work. All for Free!
We take our client's confidentiality as our highest priority; thus, we never share our client's information with third parties. Our company uses the standard encryption technology to store data and only uses trusted payment gateways.
Anytime you order your paper with us, be assured of the paper quality. Our tutors are highly skilled in researching and writing quality content that is relevant to the paper instructions and presented professionally. This makes us the best in the industry as our tutors can handle any type of paper despite its complexity.
Recent Comments