Module No: BAA6003

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ASSESSMENT DATE: Week Beginning 11 March 2024

Scenario 1

TIME ALLOWED: 25 minutes

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Learning Outcomes:

Students should be able to:

 Understand the advanced theory and practice of auditing practice and
procedures.
 Analyse and apply different audit approaches to structured and
unstructured problems.

BAA6003 Coursework 2024 Page 1

INSTRUCTIONS:

In your team prepare a presentation on Andover Soft Furnishings

Ltd, answering the parts (i) to (iii). You will have a maximum time
allocation of 15 minutes per group (excluding questions).

Following your presentation, your team will be asked additional

questions, so ensure that you make yourself aware of all relevant areas,
not just the area you are presenting on.

How you allocate the work to be presented is up to you, but bear in mind
that there are marks allocated for team work.

If a team member is asked a question to which you are able to add

supplementary, relevant information, then additional marks will be
allocated to you.

Marks will be allocated as shown in the table below:

Presentation Additional questions

40% content (slides and 30% if additional
verbal) question answered well
15% presentation style 15% extra marks if
supplement answer to
team mates question

The marking scheme that will be used to assess your presentation forms
part of this document. This coursework represents 50% of your final
module mark.

All groups will be recorded, for IV purposes.

The lecturer will need an electronic copy of your Powerpoint presentation

before your presentation. This should reach the lecturer no later than
Friday 15 March 2024 by 11am, via Turnitin on Moodle. You will not
be able to alter the presentation after this date and it will be the copy the
lecturer holds that you will use for your presentation.

BAA6003 Coursework 2024 Page 2

Fusion Ltd (Fusion) manufactures and sells children’s building toys and
brick sets and has been trading for over 40 years. It has a year-end of 31
December 2023. All production is concentrated at one site in Barry. The
finished goods are despatched to customers from the Barry site.

In February 2023, Fusion introduced a continuous or perpetual inventory

system, to avoid the disruption of a year-end inventory count. It is hoped
that the new method of recording inventory will provide more accurate
inventory records on a continuous basis for Fusion.

At the production site, specific areas are delegated for raw materials,
work-in- progress (WIP) or finished goods. The raw materials and
finished goods areas are further sub-divided into 12 sections and these
are each counted once during the year. The counting team includes a
member of the internal audit department and a warehouse staff member.
Nia Davies is the Inventory Manager and she has set up the procedures
to be followed for each perpetual inventory count performed.

The counting team prints the inventory quantities and descriptions from
the system and these records are then compared to the inventory
physically present. Any discrepancies in relation to quantities are noted
on the inventory sheets, including any items not listed on the sheets but
present in the raw materials or finished goods sections. The team is
expected to note any damaged or old items by drawing a line through
them, which indicates to the inventory clerk that these items should be
deleted from the inventory records. The sheets are then passed to the
inventory clerk for adjustments to be made to the records when the
count has finished.

During the counts, inventory continues to move in and out of the

production site. Raw materials arrive at the East door and finished goods
are despatched to customers from the West door. At the year-end, it is
proposed that the inventory will be based on the underlying records
rather than by a physical year-end count. Also at year-end, any work in
progress is given an estimated value by Nia and this will be reflected in
the financial statements.

Fusion’s site at Barry operates 24 hours a day, seven days a week on a

three- shift system. The workforce consists of 240 hourly paid
employees, who operate the manufacturing and packing machines. Each
BAA6003 Coursework 2024 Page 3
of the three shifts has a supervisor who is salaried. In addition, Fusion
employs 100 other salaried employees who work in the Marketing,
Sales, Human Resources (HR), Accounts and Administration
departments.

Fusion’s hourly paid employees clock in and out of the factory using an
employee swipe card. Employees are paid on an hourly basis for each
hour worked and the money is paid by cash, weekly. There is no
monitoring of the clocking in and out process. The employee swipes their
card through a monitoring machine, which identifies the employee
number and links the total number of hours swiped to the hours worked
report. At the end of every week, the monitoring machine automatically
closes the week off and uploads the hours worked report to the payroll
system. This is accessed, like the rest of the payroll system by a
password. Only two people have access to the password: Abdullah the
payroll clerk and Hanna the sales ledger clerk. Hanna covers for
Abdullah when he is absent due to sickness or annual leave. For each
employee, the hours worked report allocates total swiped hours between
standard and overtime categories. Abdullah prints out the hours worked
report and reviews it for any obvious errors. If he spots a problem, he
overrides the error and adjusts the relevant figure directly in the payroll
system.

The payroll system calculates on a weekly basis, the cash wages to be

paid to the hourly paid employees. Using the hours worked report it
identifies the standard hours and multiplies the hourly wage rate by
number of hours worked by each employee and generates the gross
pay, net pay and appropriate tax and pension deductions. These
calculations are not checked by anyone as they are performed by the
payroll system. An annual hourly wage increase is given to the
employees, which the HR department notifies the payroll department of
by email. No review of the change to the payroll master file is performed.

Every Thursday a security company arrives at the factory with payroll

money, which Abdullah, plus any spare office-based employee, uses to
prepare the pay packets. On a Friday, day shift factory employees
collect their pay packets from the receptionist who sits just outside the
payroll office. The pay packets for night shift workers are left in the
payroll office for the night shift supervisors who collect them, using their
BAA6003 Coursework 2024 Page 4
spare key to access the office. The night shift supervisors physically
distribute them to the workforce. If any employees are absent, then
either the receptionist (day shift) or the factory supervisor (night shift)
keeps these wages and gives them to the employee on their return to
work.

All salaried employees are paid by direct transfer into their bank
accounts. All calculations are performed using the payroll system.

You are employed by Jones & Co, who are Fusion’s external auditors.
Your team has just finished its audit of Fusion and the engagement
partner has requested you present the results of your work to date as
outlined below.

Required:

(i) Outline the audit work your team has performed which
assesses the assertions underlying Fusion’s inventory and
payroll figures in the financial statements.

(ii) On the basis of the work performed in (i), analyse both the
strengths and weaknesses you have uncovered in the
company’s inventory and payroll cycles, making
recommendations where appropriate.

BAA6003 Coursework 2024 Page 5

Marking Scheme

As a group member

1. Did the presentation have a logical structure – an introduction, main body and conclusion?

Not evident Weak Satisfactory Good Very Good

0 1 2 3 4

2. Was the presentation (excl. questions) to the point and timeliness adhered to?

More than 15 minutes or less 5-6 min or 7-10 min Between 11-15
than 5 minutes 16-17 min min
0 2 3 4

3. Was the font large enough to be read and the slides not overcrowded?

Not evident Weak Satisfactory Good Very Good

0 1 2 3 4

4. Did the audit work performed clearly identify internal controls?

Not evident Weak Satisfactory Good Very Good

0 1 2 3 4

5. Were the weaknesses clearly outlined?

Not evident Weak Satisfactory Good Very Good

0 1 2 3 4

6. Were the recommendations appropriate to remedy the weaknesses?

Not evident Weak Satisfactory Good Very Good

0 1 2 3 4

7. Was there evidence that six evidence collections methods were clearly understood?

Not evident Weak Satisfactory Good Very Good

0 2 6 9 12

BAA6003 Coursework 2024 Page 6

8. Was there evidence that the presentation was performed in a cohesive manner, that
indicated the group had worked together?

Not evident Weak Satisfactory Good Very Good

0 1 2 3 4

As an individual

9. Was body language appropriate? e.g. eye contact, smile

Not evident Weak Satisfactory Good Very Good

-1 1 2 3 5

10. Was the dress code appropriate?

Weak Satisfactory Good Very Good

-1 3 4 5

11. Did the student speak clearly, confidently, concisely and at an appropriate speed?

Not evident Weak Satisfactory Good Very Good

0 1 2 3 5

12. Was the student’s additional question answered in a manner which displayed the
question was understood and relevant information brought in to support the answer?

Not answered Weak Satisfactory Good Very Good

0 5-14 15-19 20-24 25-30

13. Did the student supplement a team member’s question?

Not evident Weak Satisfactory Good Very Good

0-1 2-5 6-7 8-10 11-15

Mark out of 100 =

BAA6003 Coursework 2024 Page 7