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CanDrug Limited is a large public corporation incorporated under the Canada Business Corporations Act .
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CanDrug Limited is a large public corporation incorporated under the Canada BusinessCorporations Act

. The company is an important manufacturer of pharmaceutical products and operates three plants in Canada's largest cities. The corporate head office is located in Vancouver. The following information appeared in the corporation's financial statements for the years ended December 31, 2018 and December 31, 2017:

2017 2018

Sales 985 910

Cost of sales 640 585

Selling and administration 125 110


Net profit after taxes 101 106

Cash and short-term deposits 41 49

Accounts receivable 106 91

Inventories 94 117

Accounts payable 76 59

Long-term debt 98 85


All customer orders are transmitted by sales agents to head office by fax and are then entered into head office's computerized sales order system. The computer system automatically determines the plant from which products will be shipped to customers.


The computer system invoices customers according to shipping information entered by each plant, and invoices are forwarded to customers by mail. CanDrug maintains bank accounts in each province where it operates. Customers are instructed on invoices to deposit funds directly into these bank accounts. The treasury function at head office is responsible for managing all bank accounts.


The purchasing function is also centralized at head office. For the year ended December 31, 2018, purchases of raw materials amounted to $410 million. Purchase orders are prepared at head office according to purchase requisitions prepared by each plant. All suppliers' invoices are received at head office where all payments are made.


To finance its growth in the last three years, the company has also negotiated long-term loans and credit lines with two Canadian banks to finance its short-term capital needs. All excess funds are invested in short-term deposits. The treasury function is also responsible for all borrowing and investing activities.


Cash management is a critical area for the success of CanDrug Limited, and this activity has been selected for review by the internal audit group in 2019. To plan this audit, the director of internal audit has asked Ana Mendes, audit manager, to make outline of an audit plan in which she will identify the following:


a.   the main areas to be examined

b.   the audit criteria to be used

c.   the audit procedures to be followed to satisfy audit criteria in each area


Required

 

Assume the role of Ana Mendes and prepare the outline of a draft audit plan requested by the director.


Note: For part (b), high-level (general) criteria are sufficient at this stage

The audit plan denotes the establishment of strategies to conduct the audit.



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