The paper "Audit Procedures That Can Be Carried Out In the Auditing Process: Case of Labels 4U" is a perfect example of a case study on finance and accounting. The report is about the USA based manufacturing company, Labels 4U that manufactures adhesive labels. This report reviews the purchasing process of the company and then provides suggestions for additional auditing procedures that could be carried out to improve the purchasing process so that there are fewer chances of error. It is important for every organization to have a proper auditing procedure so that there are fewer errors and financial statements of representing a true picture about the financial position of the company (Puttick, Taylor and Kritzinger, 101). Audit Procedures That Can Be Carried Out In The Auditing ProcessThe following auditing procedures can be carried out by the auditors while analyzing the order processing system of the company. The auditors first of all need to evaluate the authorized persons and organizational structure along with collecting information about the vendors.
Then they need to review the signatures of authorized personnel when orders are placed. Also, the auditors need to identify whether all the transactions have been properly recorded and their supporting documents are present. The auditors need to go through the policies and procedures of the organization and whether the policies of the organization cover all important points.
The auditors not only need to review the policies and procedures of the purchasing department but they also need to analyze how different departments are interlinked with the purchasing department and particularly the Accounts Payable department. After auditors have gone through the policies and procedures, they need to analyze, test and examine some of the documents to ensure that they are appropriate.
Auditors can start with the purchase orders (PO) and find out the reasons why purchase orders are still open. Also, they can compare open invoice reports with the POs to identify any error. Next, the auditors could review the expenses and their supporting documents. Also, they need to verify whether these expenses have been approved by authorized persons or not. Auditors also need to check the turnaround time of different types of expenses and try to find out any kind of relationship between expenses. After that auditors need to review the Accounts Payable reconciliations for the last few months and check different procedures as well as supporting documentation.
Auditors need to check the orders that have successfully been received and orders that have not been received and examine whether they have been properly recorded. In addition to this, the auditors need to check the name of the suppliers and whether the supplier is included in the list of the company or not. Then the auditors need to check the reporting of the orders and whether relevant people are reported about the new orders or not. Auditors also need to examine whether there is any blank or duplication present in the amount, transaction, purchase order number, vendor number, etc. The purchasing process of Labels 4U can be improved if there is more check and balance while the placement of orders as well as while invoices are being forwarded.
It is important to have proper auditing procedures so that there are fewer errors and frauds in the order processing system and thus financial statements of the company would reflect the better and more accurate financial position of the company.
It is important for auditors to review, analyze and test carefully the purchasing procedure to have a better and more efficient system.