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AUE2602 Assignment 4B (COMPLETE ANSWERS) Semester 1 2024 - DUE 9 May 2024
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AUE2602Assignment 4B
(COMPLETE
ANSWERS)
Semester 1 2024
- DUE 9 May
2024
CONTACT: biwottcornelius@gmail.com
, BubblyFizz (Pty) Ltd is a renowned soda drink manufacturing company
recognised for its premium fizzy beverages. As an auditor conducting an
inventory cycle audit, you have been tasked with evaluating the company’s
internal controls. During a discussion with management, the following
information came to your attention: i. Mrs Pepsi is responsible for receiving
completed goods at the company warehouse. She checks the slip received
from the production section, compares it with the number of crates entering
the warehouse and signs it. She then updates the inventory records on the
company’s accounting system, Cloves-Accounting, by signing in with her
unique password. ii. The warehouse has four entry points, therefore entering
and exiting the warehouse are quick processes. Staff responsible for filling
orders can manage their task quickly by entering through sliding doors and
selecting the crates that they need from the shelves. iii. These staff members
then manually write down which stock they have taken from the shelves on a
list kept in the warehouse. This list is then totaled at the end of the week, and
the Cloves-Accounting system is updated accordingly. iv. The Cloves-
Accounting system is not updated in real time because staff has not been
trained to use the system and prefer not to engage with the system unless it is
absolutely necessary. v. When staff do need to access the system, they use
Mrs Pepsi’s password to gain access to and update the necessary records. vi.
Inventory counts take place once a year, just before the year-end audit. There
are no established procedures for reconciling physical inventory counts with
the inventory records in the system. vii. Staff in the production department
complain about insufficient documentation of raw materials. viii. The company
lacks consistency in its inventory valuation methods. This is due to a
disagreement between two of its directors, Miss Coca and Mr Sprite.
AUE2602/assessment4/semester1/2024 Page 3 of 3 REQUIRED a) Describe
two risks relating to the production needs of BubblyFizz (Pty) Ltd
(manufacturing too little or too much inventory) and explain the manual
controls that could be implemented to address these risks. (5)
Two risks relating to the production needs of BubblyFizz (Pty) Ltd are:
1. Overproduction Risk: If the company produces too much inventory, it may lead to
increased storage costs, obsolescence, and tied-up capital, resulting in financial losses.
Manual Control: Implement a production planning and forecasting system that utilizes
historical sales data, market trends, and customer demand forecasts to estimate the
required production levels accurately. Regular review meetings between production,
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