Question

Question 1
DinZee Co assembles fridges, microwaves, washing machines and other similar domestic appliances from parts procured from a large number of suppliers. As part of the interim audit work two weeks prior to the company year-end, you are testing the procurement and purchases systems and attending the inventory count.
Procurement and purchases system
Parts inventory is monitored by the stores manager. When the quantity of a particular part falls below re-order level, an e-mail is sent to the procurement department detailing the part required and the quantity to order. A copy of the e-mail is filed on the store manager’s computer.
Staff in the procurement department check the e-mail, allocate the order to an authorised supplier and send the order to that supplier using Electronic Data Interchange (EDI). A copy of the EDI order is filed in the order database by the computer system. The order is identified by a unique order number.
When goods are received at DinZee, the stores clerk confirms that the inventory agrees to the delivery note and checks the order database to ensure that the inventory were in fact ordered by DinZee. (Delivery is refused where goods do not have a delivery note.)
The order in the order database is updated to confirm receipt of goods, and the perpetual inventory system updated to show the receipt of inventory. The physical goods are added to the parts store and the paper delivery note is stamped with the order number and is filed in the goods inwards department.
The supplier sends a purchase invoice to DinZee using EDI; invoices are automatically routed to the accounts department. On receipt of the invoice, the accounts clerk checks the order database, matches the invoice details with the database and updates the database to confirm receipt of invoice. The invoice is added to the purchases database, where the purchase day book (PDB) and suppliers individual account in the payables ledger are automatically updated.

Required:
State the aim of a test of control and the aim of a substantive procedure

Answer 1

Organizations cannot afford to commit a mistake in this organizational setup because of the very high level of competition in any field of industry and for that they need to maintain, control and regulate the business processes of the organizations in order to ensure that the business objectives are in control and maintained. The aim or objective of the test of control in simple which will ensure that the maintain the process control of the organization and its business objective and substantive procedure will detect the fraud or any issues or discrepancy reported which needs to be taken care and managed as well so that the issues and discrepancies do not affect the organization in a negative manner as well. If there is any error then that should be reported so that it does not affect the same.