Chpt 12 Group Work .docx - Spencer Rotan Sal Garcia Alex...

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Spencer Rotan Sal Garcia Alex Leal Chapter 12 Group Problems 12-36 Misstatement Error or Fraud Control Substantive Procedures A. Error Create better inventory taking procedures that are clearly defined, and have inventory supervision Observe inventory being taken. B. Fraud Create controls to clearly define when inventory is Observe inventory, inspect receiving after the cutoff date. Have docs and compare to accounting prenumbered receiving docs records to check cutoff. C. Fraud Internal controls over management through an audit committee and internal auditors to monitor Sample inventory items and reconcile management’s ability to over-r them for pricing accuracy. ide internal control procedures 12-37 A) Three Business Risks: 1. Inventory Security: Internal theft reducing inventory and profits 2. Competition: other manufacturers creating better drugs or selling similar drugs for less 3. Violation of FDA regulations for safe production and storing B)
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Unformatted text preview: 1. Current Period inherent risk of material misstatement in financial reporting. If the loss of inventory is not detected, then their inventory will be overstated or if it is detected and not reported their inventory will also be overstated. 2. Current Period inherent risk, if the inventory becomes obsolete, they will need to write it down to reflect NRV. 3. Current Period Inherent Risk- potential over valuation of inventory that violates FDA regulations and cannot be sold. C) 1. Physical control over inventory and monitoring if they are followed. 2.Risk assessment controls over monitoring competition 3. Controls over quality of manufacturing and storing. Have a QC department that oversees production and storage. D) 1. Observe inventory 2. Observe valuation procedures of obsolete inventory 3. Gain understanding of the customers environment and test internal controls over monitoring of competition ....
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