Information provided would affect your audit strategy

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Reference no: EM132205786

You are responsible for preparing audit strategies for the following two independent situations in MCL’s audit.

i) MCL has a powerful computer system for inventory. Management has indicated that the main advantages of the system include good controls and detailed information on inventory levels and gross margins for both product line and geographical area. (6 marks)

ii) Your audit strategy for sales placed significant reliance on internal controls and the use of analytical procedures. However, your testing of the internal control system for sales has found a significant number of instances where customers’ credit ratings have not been checked and approval has not been sought when abnormally large discounts have been given. The sales manager states that these changes to control procedures are the result of current difficulties in maintaining past sales levels. (8 marks)

Required:

Briefly explain how the information provided would affect your audit strategy in each case.

Reference no: EM132205786

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