The current ratio includes all the current assets and liability
SUBJECT: Recommendations
This memo is regarding the findings which are related to the various clients of OEV and will also provide advice/recommendation in the following areas:
Inventory. Due to complaints about the Quality of the product, which may result in the holding of inventory, which will need to write-off through the discounts (CAANZ, 2019)
Doubtful debt. Unsatisfied debtors might not pay. This can might occur, as there are many complaints and are not satisfied with the Quality in that case they might not pay (CAANZ, 2019).
Return on Asset ratio basically indicates that profit which the company has earned in relation to its resources. In the context of Zing Ltd, it can be concluded that they had a higher ROA ratio when comparing it with the previous year and also from the industrial average. Thus, it can be said that they are generating more profit from less investment. It is vital for the company to interpret the underlying factors so that they can analyze the level of rate of return in comparison to other entities (CAANZ. and Kemp, 2017).
Net profit measures the profit after the Tax, they are calculated after all the expenses are included, any fluctuation in this ratio implies that there is misstatement either in the selling or expense account(administrative). In the context of Zing Ltd, we can state that their net profit ratio is lower in comparison to their previous year, but it can be clearly seen there has been no fluctuation over the period of time which indicates that there no requirement for the further testing of expenses(Gay and Simnett, 2010).
They have 3 clerks for maintaining an account for payable and receivable and banking can be considered as a strength of the internal control
Getting a quote from various suppliers, from the case study it can be seen that machinery operator informs the manager about the raw material regarding its shortage and the warehouse manager take things in his hands by initiating the order through making the call to various suppliers to get the Quotation, which is one of the strengths of internal control.
Lack of copies of the delivery note, this is also one of the major areas where the internal control of the firm lacks behind, there should be a minimum of 3 copies of delivery note so that transparency could be maintained. One copy should be for the supplier, other for the manager and lastly, there should be one copy that should directly go to the accounting department for maintaining the record.
A payroll audit is an important part as through this audit analysis of company overall payroll is assessed to make sure they are accurate and valid. The payroll audit usually examines the firm’s active employees, their pay rates, wages and tax holdings. It is important for the hold such type of auditing once year to make sure that the process is verified and is up-to date and will also helps the firms in making sure that they are legally complaint with the firm (SIMNETT, 2018). In the audit, testing the payroll transaction includes which involves finding the employees who have been paid, but in reality, they shouldn’t be paid and it is vital for the auditor to make sure that a valid employee should be getting the correct amount(SIMNETT, 2018). In the context of Bryer Ltd, the auditor must focus on certain parameters such as
It is important for the auditor to compare all the revenue and should compare it with previous years and should also analyze the budget and in case of fluctuation that should be also investigated.
It is important for the auditor to analyze the bank statement so that it can be verified and it will also help the auditor in analyzing the accuracy.
CAANZ, 2019. Financial Reporting Handbook 2019 New Zealand. Wiley.
CAANZ. and Kemp, S., 2017. Auditing, Assurance And Ethics Handbook 2017 Australia. Milton, Qld: Wiley.