- 30 Marks
AAA – L3 – Q24 – Planning
Identify issues affecting audit planning for the Accra branch of Rosaline, a furniture manufacturer with a complex IT system.
Question
Your firm has just been appointed the first auditor to the Lagos branch of Pinnacle Furnishings, a Nigerian manufacturer of household furniture. The branch has only been in existence for thirteen months. The branch is involved in importing and distributing the furniture through wholesalers and major retailers in Nigeria. The auditors of the Nigerian company are a medium-sized Nigerian firm. There is no legal requirement for a branch audit, but management has expressed concern about the Lagos operations.
A complex computerised accounting and inventory control system is maintained. You have ascertained that the mainframe installation is in Nigeria. The terminals in Nigeria (Lagos) are linked to the mainframe by private telecommunications lines. All input is performed in Lagos with overnight batch processing and output the following day.
The software used is a Nigerian package and all user manuals are written in Yoruba; there are nine volumes (nine manuals) in total. The IT personnel in Lagos are competent users of the system but none of the staff has a detailed knowledge of the actual software.
The Lagos branch has been expanding rapidly and problems have been experienced because its IT department has been unable to keep pace with developments.
An internal auditor is employed, and he reports directly to the manager of the branch, who has set down his programme of work. The internal auditor is not a qualified accountant and his working papers and reporting are not very formalised. He performs daily checking of certain areas and has an audit programme. The programme of work is structured in such a way that a specific area is examined each month.
Required
Identify and comment on the issues raised as they affect your planning of the audit of the Lagos branch.
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