Audit report

Huda Mousa
 Introduction
Purpose of the Audit:
• Verify accuracy and reliability of HUSKY Corp.'s financial reporting,
specifically regarding diverse inventory holdings.
Importance of Accurate Inventory Reporting:
• Vital for production planning, sales forecasting, and overall business
operations.
Contextualization within Company Operations:
• Goes beyond financial scrutiny, including unpaid invoices, shipping details,
and credit limits for a comprehensive examination.
Overall Goal:
• Ensure transparent and dependable financial data for informed decision-
making and financial stability at HUSKY Corp.
 Scope of Audit
The audit focused on key financial areas at HUSKY Corp. to ensure accurate reporting.
Covered Areas:
1. Accounts Receivable General Ledger:
• Detailed sub ledger for 2013 sales.
2. Confirmation File:
• invoices, confirmed amounts, and discrepancies.
3. Customer Credit Limit File:
• List of credit limits for each customer.
4. Shipping File:
• Shipment numbers and dates for sales.
5. Inventory File:
• Data on cost of goods, inventory numbers, units sold, and selling prices.
 Methodology
1. Confirmation:
• Internal and external sources.
• Strengthened scrutiny for financial record accuracy.
2. Reconciliation:
• Meticulous recalculation of provided files.
• Focus on inventory accuracy and credit limit adherence.
3. Dual Methodology:
• Combined confirmation and reconciliation for a robust assessment.
• Validated financial statements for integrity.
4. Data Validation:
• Cross-verification of data from various sources.
• Thorough examination of key files for accuracy.
5. Comprehensive Examination:
• Reviewed Accounts Receivable, Confirmation, Credit Limit, Shipping, and Inventory files.
• Identified areas for business improvement.
• Ensured accuracy and dependability in financial reporting.
 Strong and weak areas Weak Areas:
Strong areas:
1. Credit Limit Exceedance:
1. Inventory Turnover: • Identified six customers with balances exceeding the credit
• Inventory turnover exceeds 2.0.
limit by approximately $10,000 each.
• Only nine out of 185 inventories
• Potential increase in bad debt expense or uncollectible debt.
have a turnover below the • Recommendation: Place accounts on hold until a minimum
threshold.
amount owed is settled.
• Indicates efficient management of
2. Outstanding Balances Over 45 Days:
inventory and optimal use of • Total outstanding balance of $46,000 exceeding 45 days.
resources. • Recommendation: Halt transactions with customers who
2. Financial Position:
exceeded their credit limit.
• Low inventory write-down
• Accounting department to contact customers for payment
requirement, approximately $930.
status, consider transfer to collections if necessary.
• Strategic decision to write up
• Proactive measures for financial risk mitigation and overall
inventory valuations by $53,000.
fiscal health.
• Reflects a strong financial position
and aligns with profitability goals.
 Key Findings & Audit
Insights
Results of Audit Program Steps:
1. Net Values: Verified inventory at $8,124,998.66 as of December 31, 2013.
2. Credit Limit Issues: Identified six customers exceeding limits by $10,000 each.
3. Sales Cutoff Test: Revealed discrepancies, prompting necessary adjustments.
4. Unpaid Bills: Discovered $46,000 outstanding over 45 days, suggesting immediate action.
Audit Insights:
• Unsold Inventory: Found 14 unsold items costing $130,000.
• Inventory Turnover: Detected items with turnover below two, signaling overstocking.
• Write-Downs: Recognized 38 items needing write-downs, totaling $939.39.
Implications:
• Urgent measures needed for credit limit issues and outstanding bills.
• Strategic adjustments in inventory turnover and write-downs crucial for financial stability.
 Action Plan &
Recommendations
Credit Management:
• Identify and monitor clients exceeding credit limits.
• Discuss with the credit manager for potential collections.
• Reevaluate clients with balances over the credit limit.
Sales and Collections:
• Execute sales cutoff test for accurate recording.
• Monitor bills over 45 days, discuss with credit manager.
• Follow up on unpaid bills for collections.
Inventory Management:
• Include extended cost of unsold items.
• Determine write-downs for finished goods and raw materials.
• Notify Sales and Finance for necessary actions.
 Conclusion
In summary, the audit of HUSKY Corp.'s inventory has revealed both strengths and weaknesses in various
aspects of the company's financial operations. From credit limit issues to insights into inventory management,
our findings emphasize the critical importance of proactive measures. The comprehensive action plan
presented addresses specific challenges, including credit limit concerns, outstanding balances, and
opportunities for improvement in inventory turnover and valuation. These recommendations aim to fortify
financial processes, mitigate risks, and optimize overall fiscal health. As the auditor, my role has been to
identify areas for enhancement and ensure the accuracy of financial reporting. Looking forward, these findings
present an opportunity for continuous improvement, fostering a positive outlook and commitment to HUSKY
Corp.'s long-term financial well-being. Thank you for your attention and consideration.