DEPARTMENT OF ACCOUNTING AND
Group number:
corporate governance
Faculty of Business
and Economics
GROUP ASSESSMENT COVER SHEET
ACCG 340
UNIT CODE
SEMINAR DAY &
TIME
15/05/2017
DUE DATE
SEMINAR
Monday 16:00-18:00
May Vargas
LEADER
GROUP MEMBER DETAILS
NO.
STUDENT ID
LAST NAME
FIRST NAME(S)
1*
43495672
Xin
Yang
2
43990436
Farzia
Jafar
3
43489834
An
Li
4
43477925
Tingshan
Zheng
5
43564399
Xudong
Hu
*The first listed student should be the only student to submit the group assignment on
Turnitin on behalf of the entire group.
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PRIOR TO SUBMISSION. ELECTRONIC SUBMISSION CONSTITUTES AGREEMENT BY
ALL GROUP MEMBERS.
DECLARATION
We certify that:

This assessment is our group’s work, based on our personal study and/or research;

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assessment, including any material generated in the course of our employment;

Neither the assessment, nor substantial parts of it, have been previously
submitted for grading in this or any other institution;

We have not copied in part, or in whole, or otherwise plagiarised the work of other
students;

We have read and we understand the criteria used for assessment;

The assessment is within the word and page limits specified in the assessment brief;

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
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
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have retained a duplicate copy of this assessment.
Please refer to Student Information in the Handbook of Undergraduate Studies or
www.student.mq.edu.au/plagiarism for the full University policy on plagiarism.
1
Supplier dashboard finding
- Megatronics have in total 49 suppliers, which include both overseas and local suppliers. The
major suppliers belong to Australia and the remaining are overseas, which mainly consists of
5 Chinese and 5 Singapore.
- The discount rate offered by the suppliers are quite different based on the bar chart. The bar
chart shows that majority of suppliers provide 5% and 20% discount to Megatronics. Also,
portions of suppliers do not provide any discount to Megatronics.
- The credit terms vary from supplier to supplier. The pie chart shows that 18.4% of suppliers
offer the longest period whereas 26.5% of suppliers only allow 7 days to pay.
Conclusion: The existence of overseas suppliers may lead to delayed shipment or fluctuant
currency exchange rate would bring for Megatronics and suppliers. Moreover, the various
discount rate and credit term provided by various suppliers would make the transactions
become more complex and the employees of Megatronics might make human errors when
they deal with the transactions because lack of experience.
Employee dashboard finding
2
- There are 22 employees working for Megatronics and they play 10 different roles in the
company, which the main positions are engineer and storeperson. The position for each
employee can be easily found from the tree map.
- The proportion of the staffs regarding to the purchasing and accounting, which have
important relation with the transactions between the company and suppliers is lower
compared with other positions in the company.
- The employees working for the company consists of 3 part time employees which is 13.6%
in total and the rest work as full time.
Conclusion: Most employees who work, as full time would maintain the daily operation of the
company as a stable situation. In addition, the employees in relation to the purchasing and
accounting in these company are absent, which means that when the business of the company
extend in the future, they don't have enough ability and experience to handle more and more
transactions.
Purchase order dashboard finding
- The pivot table shows the number of order processed by the employees under different
positions and the average amount of the orders they handled. According to the background of
the company, it mentions that if the order amount over $5000, the order can process only after
purchasing manager’s approval.
- No.32 supplier is a non-existent supplier but in the tree map, it still shows that this supplier
receives 106 orders from the company.
3
Good received dashboard finding
- The line chart shows that the number of order and quantity goods received float up and
down in several period during the financial year, the overall tendency still maintains steady.
- As per the bar chart, it notifies that some errors occurred during the process of receiving
goods. The main reason to lead to these errors is because the suppliers did not deliver the
goods. Some other reasons mainly consist of delivering the wrong items and delivering
incorrect quantity of goods.
- For each error due to the incorrect item and incorrect quantity, they all have action to follow
up the problems. However, they take no action for those undelivered items, which the control
risk is existed.
Invoice dashboard finding
- The combo chart shows the comparison between the sum of subtotal and the sum of
bill-total. It announces that the bill-total for each month is less than the subtotal after
calculating with the discount provided by the suppliers.
- The overall tendency of the number of invoices in this financial year is stable.
4
(b) And (c)
Significant risk
There is a risk of misstatement of purchase amount as staffs need to
deal with different suppliers with various discount term, in addition,
the pervious account supervisor left the company, and a new account
supervisor is not familiar with the company’s procedures, which is
increase the potential of making mistake. Purchase amount should be
recorded in an exact amount.
Assertion at risk
Accuracy in relation to purchase account
Select samples of invoice from different suppliers and audit should
Substantive
test calculate the amount of each invoice and compare with the record in
and audit evidence the system to check if the amounts recorded in the system are
correct.
Significant risk
There is a risk of overstatement of trade payable as there is some
suppliers did not deliver goods shown in the good received
dashboard and company take no action for the undelivered goods.
Company should require suppliers to adjust the invoice amount or
ask for credit notes return and ensure the amount recorded in
account payable are correct.
Assertion at risk
Accuracy, valuation and allocation related to trade payable account
Select samples of purchase order for non-delivery good and audit
Substantive
test
should adjust the amount of corresponding invoice to check if the
and audit evidence
amount is the same as the amount provide by the company.
Significant risk
There is a risk of overstatement of purchase as company makes 106
orders to non-existing suppliers this year and the amount is
significant. The non-existing purchase order should be cancelled and
recalculate the amount.
Assertion at risk
Occurrence in relation to purchase account
Review the invoice provided by the suppliers that are not in the
Substantive
test
master list and vouching with corresponding purchase order and
and audit evidence
receiving report to check if the purchases transaction are authentic.
5
Significant risk
There is a risk of overstatement of purchase as company make 106
order to non-existing suppliers this year and the amount is significant.
The non-existing purchase order should be cancelled and recalculate
the amount.
Assertion at risk
Occurrence in relation to purchase account
Review the invoice provided by the suppliers that are not in the
Substantive
test
master list and vouching with corresponding purchase order and
and audit evidence
receiving report to check if the purchases transaction are authentic.
(d)
Audit approach:
Substantive Approach
Procedure
Extent
Tests of controls
Substantive analytical procedures
Substantive tests of details
None
None
Extensive
Justification

According to the analysis of part a and b, the internal control of this
company is not effective. As per the case, this company wants to expand their
business. However, there is no good strategies and policies in place for the expansion.
I believe that the problem stems out from the staffs, for example lack of formal
procedure for training and termination of staffs. Some errors were detected in the
warehouse department in relation to good received. For instance, no action was taken
regarding some undelivered items. Furthermore, if the purchase order over $5,000,
purchasing manager should approve the order; however, most of it was approved by
the financial controller. Finally, after analyzing the data, it can be seen that there is a
nonexistent supplier who has made 106 orders. That’s the reason why the internal
controls are not good in this company and base on this, test of control should not be
6
applied.

Justification on the audit approach is developed when the internal controls
are not working properly. Substantive Analytical procedure is small and it performs
for identifying and checking the high-risk areas only.

The responsibility of the auditors is to reduce the overall auditing risk to an
acceptable level. In this company, managing analytical procedures will be purpose
less because of the poor internal control. Compare with analytical procedures,
substantive test of details should be performed extensively as the test of controls and
substantive analytical procedure is incomplete. As an auditor, when they face the
complex operational environment and high control risk, it is necessary to reduce
overall auditing risks. There are kinds of approaches can be used to assist the
substantive test of details. For example, extending the size of sample when to collect
the evidences. In addition, during the process of the analyzing purchase transactions,
the auditors should reduce the materiality to a low level.
(e) And (f)
(e) Control
(f) Test of control
Three-way match – Matching details of
Select sample of invoice and
i
each invoice with the goods received note ensure that the invoice agrees to the
.
and purchase order before the payment run.
good received note and purchase order.
When the requirement received from
different
kinds
of
warehouses,
Select a sample of purchase order
the that the value was more than $5000 and
purchasing
i
officer would place the orders check that they were issued only with
i.
and send to the related suppliers, follow by the
signature
of
the
purchasing
having a copy to the account department, manager, which to prove that the
which assist to record and trace. If the value overvalue orders were undertaken based
7
of the purchasing order over $5000, then the on the approval of the purchasing
purchasing
officer
should
inform
the manager.
purchasing manager about the order and
process them under the authorization from
the manager to avoid the warehouse order
the unnecessary quantity of materials.
Authorisation of payment over $3000
Select a sample (representative of
to single creditors is required from the the total population) of record from the
i
financial controller who checks the payment file and see if they were signed
ii.
supporting docs before they are being off by the financial controller before the
included to the payment run.
payment was made.
(g)
Assessment
of
Data
Further evidence required
effectiveness
limitations
The orders that
Purchase
exceeds $5000 needs manager
could
purchasing manager’s not be located in
approval but based on the staff list.
Given
internal
control
is
the data 1145 orders
ineffective, no further evidence in
exceeded $5000 and
relation to controls is required. The
Financial
financial impact of this needs to be
ii
controller
approved a total of
assessed
1047
population given it’s a fraud risk.
orders.
The
by
testing
the
entire
average order value
was
proves
$15390.
This
that
the
8
internal
control
in
place is not effective.
Payments
to
single
The approval
creditors over $3000 of payment over
need
financial $3000 cannot be
controller
approval found in the data.
but in this case the
Given
above
control
internal
control
is
is
ineffective, no further evidence in
related to this because
relation to controls is required. The
it is essentially the
iii.
financial impact of this needs to be
same
person
assessed
approving
the
by
testing
the
entire
population given it’s a fraud risk.
purchase order and the
payment
to
the
supplier.
No
point
testing as it is linked
to the above.
(h)
After a series of analysis based on the dashboard, my response would not change because
control environment and effectiveness of controls for this company have been tested, which
the results show that they perform ineffectively. Therefore, according to the situation of this
company, the substantive approach should be undertaken continually to control the risk at an
acceptable level.
9