Sea Gull Airframes

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AUDIT OF INVENTORY

Cesar Almario Cesar Almario Louise Franchesca Bias Louise Franchesca Bias

Johnrenzo Canoy Johnrenzo Canoy Snyrrah Jannel De Snyrrah Jannel De VeraVera

Angela Liban Angela Liban Paolo Munar Paolo Munar

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IA12404

GROP ! Oc"ober #$ %&#'

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TABLE OF CONTENTS () CAS* ASS(G+*D... 3 (() (+,RODC,(O+... 5 ((() BAC-GRO+D...5 (V) D(SCSS(O+S... 6 A) F(+D(+GS... 6 B) AD(, SC.*DL* SMMAR/...6

V) ASSOC(A,*D R(S-S A+D R*COMM*+DA,(O+...7

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I. CASE ASSIGNED

/ou are assigne0 "o "he December 1#$ %&#1$ au0i" o2 Sea Gull Air2rames$ (nc) ,he com3any 0esigns an0 manu2ac"ures aircra2" su3ers"ruc"ures an0 air2rame com3onen"s) /ou obser4e0 "he 3hysical in4en"ory a" December 1# an0 are sa"is2ie0 "ha" i" 5as 3ro3erly "a6en) ,he in4en"ory a" December 1#$ %&#1$ has been 3rice0$ e7"en0e0$ an0 "o"ale0 by "he clien" an0 is ma0e u3 o2 abou" '$&&& in4en"ory i"ems 5i"h a "o"al 4alua"ion o2 89$%!'$&&&) (n 3er2orming in4en"ory 3rice "es"s$ you ha4e 0eci0e0 "o s"ra"i2y your "es"s an0 conclu0e "ha" you shoul0 ha4e "5o s"ra"a: i"ems 5i"h a 4alue o4er 8'$&&& an0 "hose 5i"h a 4alue o2 less "han 8'$&&&) ,he boo6 4alues are as 2ollo5s:

No. of items Total Value

More "han 8'$&&& '&& 8;$#'&$&&& Less "han 8'$&&& ;$'&& ;$#%'$&&& '$&&& 89$%!'$&&&

(n 3er2orming 3ricing an0 e7"ension "es"s$ you ha4e 0eci0e0 "o "es" abou" '& in4en"ory i"ems in 0e"ail) /ou selec"e0 ;& o2 "he o4er 8'$&&& i"ems an0 #& o2 "hose un0er 8'$&&& a" ran0om 2rom "he 3o3ula"ion) /ou 2in0 all i"ems "o be correc" e7ce3" 2or i"ems A "hrough G belo5$ 5hich you belie4e may be miss"a"e0) /ou ha4e "es"e0 "he 2ollo5ing i"ems$ "o "his 3oin"$ e7clusi4e o2 A "hrough G:

No. of items Total Value

More "han8'$&&& 1< 81<&$&&& Less"han8'$&&& ! %$<&&

Sea Gull Air2rames uses a 3erio0ic in4en"ory sys"em an0 4alues i"s in4en"ory a" "he lo5er o2 F(FO cos" or mar6e") /ou 5ere able "o loca"e all in4oices nee0e0 2or your e7amina"ion) ,he se4en in4en"ory i"ems in "he sam3le you belie4e may be miss"a"e0$ along 5i"h "he rele4an" 0a"a 2or 0e"ermining "he 3ro3er 4alua"ion$ are sho5n ne7") (n a00i"ion$ you no"e0 a 2reigh" bill 2or 4oucher #%=%1 in "he amoun" o2 8%&&) ,his bill 5as en"ere0 in "he 2reigh"=in accoun") Vir"ually all 2reigh" 5as 2or "he me"al 2ormers) ,his is "he 2irs" "ime Sea Gull Air2rames has been au0i"e0 by your 2irm)

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INVENTOR ITE!S "OSSIBL !ISTATED

Des#$i%tio& 'ua&tit( "$i#e Total1

A) L1! s3ars

B) B<9 me"al 2ormers C) R&# me"al ribs D) S"%< s"ru"s

*) (n0us"rial han0 0rills F) L9&1 s"eel lea2 s3rings G) V#< 2as"eners 1$&&& me"ers #&$&&& inches #$'&& yar0s #$&&& 2ee" ;' uni"s ;& 3airs ')'& 0ozens 8 9)&&>me"er #)%&>2oo" #&)&&>yar0 9)&&>2oo" %&)&& each <?)&& each s3ring

#&)&&>0ozen 8 %;$&&& #%$&&& #'$&&& 9$&&& ?&& %!< ''

A!"#$%& a'e a& &%a%e( "$ )*+e$%& +$-e$%"'.

Re@uire0:

a) Re4ie5 all in2orma"ion an0 0e"ermine "he in4en"ory miss"a"emen"s o2 "he se4en i"ems in @ues"ion) S"a"e any assum3"ions you consi0er necessary "o 0e"ermine "he amoun" o2 "he miss"a"emen"s)

b) Pre3are an au0i" sche0ule "o summarize your 2in0ings) se "he com3u"er "o 3re3are "he sche0ule ins"ruc"ors o3"ion)

INFOR!ATION FOR "RICING FRO! INVOICES )SEA G*LL AIRFRA!ES+ Vou#,e$

&um-e$

Vou#,e$ ate

Date %ai Te$ms Re#ei/i& Re%o$t Date

I&/oi#e Des#$i%tio&

!=<9 9=&#=&9 9=%&=&9 +e" FOB 0es"ina"ion

9=&#=&9 !! V#< 2as"eners a" 8#& 3er 0ozen ##=9# #&=#<=#1 ##=#'=#1 +e" FOB

0es"ina"ion

#&=#9=#1 #$#&& yar0s R&# me"al ribs a" 89)%& 3er 2oo"

#%=&< #%=&9=#1 #%=1&=#1 %>#&$ n>1& FOB S)P)

#%=#&=#1 #9& L9&1 s"eel lea2 s3ring a" 8<? each #%=&? #%=#&=#1 #%=#9=#1 +e" FOB

0es"ina"ion

#%=##=#1 ;' in0us"rial han0 0rills a" 8%& each guaran"ee0 2or ; years

#%=#9 #%=%!=#1 #%=%!=#1 %>#&$ n>1& FOB 0es")

#%=%&=#1 ;$%&& me"ers L1! s3ars a" 89 3er me"er #%=%1 #%=%;=#1 #=&1=#; %>#&$ n>1&

FOB S)P)

#%=%<=#1 #%$9&& inches B<9 me"al 2ormers a" 8#)%& 3er 2oo"

#%=<# #%=%?=#1 #=&9=#; +e" FOB 0es"ina"ion

#%=%?=#1 #$&&& yar0s R&# me"al ribs a" 8#& 3er yar0 9&& 2ee" S"%< s"ru"s a" 89 3er 2oo"

#%=9# #%=1#=#1 #=%&=#; +e" FOB 0es"ina"ion

#=&<=#; %$&&& me"ers L1! s3ars a" 8!)'& 3er me"er %$&&& yar0s R&# me"al ribs a" 8#& 3er yar0

/

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II. INTROD*CTION

Sea Gull Air2rames (nc) has been o3era"ing i"s glorious business since %&&9$ an0 s"ill con"inuing i"s mar6e" e73ansion aroun0 "he globe) ,his com3any has 6no5n 2or i"s so3his"ica"e0 ser4ices "ha" o22ers "o 0esigns an0 manu2ac"ures aircra2" su3ers"ruc"ures an0 air2rame com3onen"s)

III. BACGRO*ND

Sea Gull (nc) has been in "he long run o3era"ing i"s business an0 e73ose0 "o i"s numerous com3e"i"ors "o 3ro0uce high=@uali"y aircra2" su3ers"ruc"ures an0 air2rame com3onen"s) Des3i"e o2 i"s numerous com3e"i"ors Sea Gull (nc) becomes "he hos" an0 "he main su33lier o2 "he bigges" aircra2" in0us"ries) Such high as Sea Gull (nc) 2lies 2or i"s success "here are s"ill some 3oin"s o2 la3ses "ha" come in"o "heir 2ligh"$ 5here Sea Gull (nc) is e73eriencing mismanagemen" o2 "heir in4en"ory 2or "he coun"s$ billings an0 3rocesses)

,he Au0i" "eam soon hire0 by "he Sea Gull (nc) "o a00 4alue an0 "o assure "ha" "he con"rols im3lemen"e0 by "he com3any "o i"s in4en"ory managemen" is s"ill 3ro3erly 2i"s 2or "he 3rocess nee0e0 by "he organiza"ion)

As "he au0i" "eam con0uc"s i"s 3roce0ures$ "he 2ollo5ing in2orma"ion has been obser4e0 an0 ga"here0:

#) Physical in4en"ory a" December 1#$ %&#1 are sa"is2ie0 an0 5ere 3ro3erly "a6en)

%) Pricing an0 e7"ension "es" re4eale0 "ha" all '& in4en"ory i"ems "ha" has been "es"e0 in 0e"ails are sai0 "o be correc" e7ce3" 2or ("ems A "o G 3resen"e0 abo4e$ are belie4e0 "o be miss"a"e0)

1) sage o2 3erio0ic in4en"ory sys"em an0 4alues a" lo5er o2 F(FO cos" or mar6e")

;) All in4oices nee0e0 2or "he e7amina"ions are loca"e0

') Freigh" bill 2or 4oucher #%=%1 in "he amoun" o2 8%&& 5as en"ere0 in "he 2reigh"=in accoun" 5here i" shoul0 ac"ually be accoun"e0 2or "he me"al 2ormers)

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IV. DISC*SSIONS A. FINDINGS

A. L3 s%a$s

B. B5 !etal fo$me$s

C. R01 !etal Ri-s

,he #$'&& yar0s o2 R&# me"al ribs in4en"ory i"ems are sai0 "o be 3ossibly miss"a"e0) As su33or"ing 0ocumen"s 2or "hese in4en"ories$ "he in4oice sho5s "ha" "hese in4en"ories came 2rom "he 4oucher number ##=9# an0 #%=<# 0isregar0ing "he 4oucher number #%=9# because i" 5as la"er recei4e0 a2"er %&#1 year=en0) S"a"e0 "ha" "he Sea Gull (nc) uses F(FO me"ho0 as 2or "he 4alua"ion o2 "heir in4en"ories$ i" clearly sho5s "ha" "he in4en"ory 2or "he 2irs" #$&&& yar0s o2 R&# me"al ribs 5i"h "he 3rice o2 8#& 3er yar0 5ill be alloca"e0 a" "he 4oucher #%=<# an0 "he remaining '&& yar0s o2 R&# me"al ribs a" "he 4oucher number ##=9# a" "he 3rice o2 8?)'& 3er yar0 5ill be "he com3osi"ion o2 "he en0ing in4en"ory 2or "he sai0 R&# me"al ribs)

Clie&t6s Re#o$ 7189000

Vou#,e$ 12:1 1,000 yards×$10.00=$10,000

Vou#,e$ 11:51 500 yards× $9.50=$4,750

7149380

O/e$stateme&t ; 7280

,he recor0s o2 "he clien" sho5e0 "ha" "he cos" o2 en0ing in4en"ory o2 R&# me"al ribs is amoun"e0 "o 8#'$&&&) (n com3arison "o "he clien"s recor0$ "he amoun" o2 "he in4en"ory as o2 December 1#$ %&#1 shoul0 be 8#;$!'&) ,his clearly sho5s "ha" "here is an o4ers"a"emen" 2or "he in4en"ory o2 R&# me"al ribs amoun"ing "o 8%'&)

D. St2 St$uts

E. I&ust$ial <a& D$ills

F. L50 Steel Leaf S%$i&s

,he in4en"ory 2or s"eel lea2 s3ring 5ere inaccura"e) '&E o2 "he ma"erial in en0ing

in4en"ory 5ere no" accoun"e0 2or because "he recor0 sho5s "ha" ;&3air s3rings 5hich shoul0 ha4e been 9& s3rings each is mul"i3lie0 by 8<?)&&) Moreo4er$ "he amoun"

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sho5e0 in "he en0ing in4en"ory 8%<! ha4e been miss"a"e0 ins"ea0 o2 recor0ing 8%<!& i2 ;& s3rings is mul"i3lie0 by 8<?)&&

,he amoun" sho5e0 in "he clien"s en0ing in4en"ory recor0 o2 ;& 3airs o2 s"eel lea2 s3ring amoun"e0 "o 8%<! 5hich shoul0 ha4e been com3u"e0 as ;& 3air 7 %  9& s3rings 7 8<?)&& each  8'$'%&) ,here2ore$ "he amoun" is un0ers"a"e0 by 8'$%;;)

G. V1 Faste&e$s

B. A*DIT SC<ED*LE S*!!AR

V. ASSOCIATED RISS AND RECO!!ENDATION

A. L3 s%a$s Ris=> Re#omme&atio&> • • B. B5 !etal fo$me$s Ris=> Re#omme&atio&> • • C. R01 !etal Ri-s Ris=> Re#omme&atio&>

• T,e ma&aeme&t mi,t -e oi&

f$au o& -e,alf of its o?&

• Sea Gull (nc) shoul0 use 3ro3er

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o$a&i@atio&. I& t,is ?a(9 t,e o$a&i@atio& #oul ma&i%ulate t,ei$ fi&a&#ial stateme&ts9 ?,e$e i& t,e( a$e ma=i& it mo$e %$ofita-le i& t,e fa#e of t,e stateme&t ?,i#, is a#tuall( &ot ust to att$a#t %ote&tial i&/esto$s a& #$eito$s to ai t,e ist$ess t,at t,e( a$e e%e$ie&#i&.

4oucher 3ac6e"s)

• Reconcilia"ion o2 Purchase Or0er$

recei4ing Re3or" an0 "he (n4oice 2rom "he 4en0or)

• Shi2" "o 3er3e"ual in4en"ory 4alua"ion)

,his 5oul0 hel3 "he main"enance o2 "he (n4en"ory accoun" recor0s such as "he use o2 s"oc6 car0s "o main"ain "he summary o2 "he in4en"ories in2lo5 an0 ou"2lo5)

D. St2 St$uts

Ris=> Re#omme&atio&>

• •

E. I&ust$ial <a& D$ills

• •

F. L50 Steel Leaf S%$i&s

• Failure "o recor0 "he correc" amoun" o2

"he ma"erials may "rigger mani3ula"ion o2 in4en"ory coun"s 5hich can become a loo3hole 2or "he em3loyees "o commi" 2rau0 by misa33ro3ria"ing "he in4en"ory 2or his bene2i"

• Sea Gull (nc) shoul0 im3ro4e con"rols

"o ensure "he accuracy o2 recor0e0 in4en"ory

• Recalcula"e 4alue o2 in4en"ory by

mul"i3lying in4en"ory recor0s by "he 3urchase 3rice o2 "he in0i4i0ual i"ems

• Physically segrega"e access an0

secure s"orage areas agains" unau"horize0 a0mission by i0en"i2ica"ion 3ass

G. V1 Faste&e$s

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