What are the business objectives and what gaps are in their internal control?

– What are the business objectives

– what gaps are in their internal control?

– How each can be improved: control environment, risk assessment, information system, control activities, monitoring activities?

Please ask questions!!!!!!!!

I have already completed milestone one. Please read that first and then read the guidelines and grading for the other paper.

I am giving considerable time for this paper as because my first paper I didn’t do very well on. So I ask please ask questions.

If you need the textbook let me know.

Thank you very much!

Milestone 2:

Your organization has decided to move forward with the audit of EarthWear Clothiers. As lead auditor, you will select one of EarthWear Clothiers’ business objectives and create an audit plan of their financial statements. The business objectives are:

 Expand further into the global market by launching internet sites into South American countries

 Increase customer base by introducing a new extreme sports product line to attract younger consumers

 Reduce pricing to be more competitive in the marketplace by seeking out additional vendor relationships to lower costs of goods sold

 Implement an employee stock purchase plan to increase productivity and employee morale

 Reduce delivery and distribution time of products and services by adding additional warehouse locations

Milestone 3:

The items below were found while reviewing internal control during your evaluation. Consider whether the item is a significant deficiency or a material weakness based on the other facts presented in the case and the materiality limits set in Milestone Two:

 There were several instances of transactions that were not properly recorded in subsidiary ledgers; transactions were not material, either individually or in aggregate.

 There are a significant number of intercompany transactions monthly. The transactions are related to transfers of inventory between warehouses and the allocation of marketing costs between the business units. The intercompany transactions are frequently material. There is a formal management policy that requires monthly reconciliation of the intercompany accounts; however, there is no process to ensure that the procedures are performed consistently. The result is a lack of timely reconciliations, and differences in intercompany accounts that are frequent and significant.  Accounts receivable subsidiary ledgers are not reconciled to the general ledger account in a timely and accurate manner. There is a formal policy; however, there is no formal process or procedure that is followed to complete this task. The differences between the subsidiaries and ledger accounts required an audit adjustment of $376,000.

 There was a lack of adequate cut-off procedures to ensure the timely recording of certain period-end accruals. This resulted in an audit adjustment of $3,578,000.

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