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Major Deficiencies That Took Place During The Audit Process: Deficiency in The Audit Why It Was A Deficiency?

The document summarizes major deficiencies in an audit process. It notes that a new division acquired through merger was not audited thoroughly enough given its different operating characteristics. Sample errors found were not properly projected to the full population or compared to materiality thresholds after considering risk. Obsolescence issues uncovered were not fully evaluated for implications on inventory levels. Inadequate supervision of new staff led to oversight issues. Analytical procedures should have flagged the risk of obsolete inventory from declining sales.

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46 views

Major Deficiencies That Took Place During The Audit Process: Deficiency in The Audit Why It Was A Deficiency?

The document summarizes major deficiencies in an audit process. It notes that a new division acquired through merger was not audited thoroughly enough given its different operating characteristics. Sample errors found were not properly projected to the full population or compared to materiality thresholds after considering risk. Obsolescence issues uncovered were not fully evaluated for implications on inventory levels. Inadequate supervision of new staff led to oversight issues. Analytical procedures should have flagged the risk of obsolete inventory from declining sales.

Uploaded by

gladys manalili
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Major deficiencies that took place during the

audit process
Deficiency in the audit Why it was a deficiency?
 The new division should have been audited more  It came to Merkle through merger and was likely
thoroughly. to have different operating characteristics and
internal controls.

 The determination that the errors in the sample  The errors should have been projected from the
were immaterial was improper. sample to the population, and the projected error
should have been compared to tolerable
misstatement, after considering risk.

 The obsolescence problem uncovered in the audit


should have been evaluated carefully to consider
the implications on potential obsolescence of
inventory.
Deficiency in the audit Why it was a deficiency?

 Inadequate supervision and review  Given the new personnel on the


engagement, Black apparently failed to
adequately supervise and review the work
of assistants.
 Auditor should have been aware of the risk  Had the auditor used analytical procedures
of obsolete inventory. the decline in sales should have warned the
auditor to a potential decline in profits and
obsolete inventory.

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