Kudler Fine Foods Audit Processes Essay Example
Kudler Fine Foods Audit Processes Essay Example

Kudler Fine Foods Audit Processes Essay Example

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  • Pages: 4 (941 words)
  • Published: February 9, 2017
  • Type: Case Study
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Methods of Auditing at Kudler

Kudler Fine Foods has grown its operations and upgraded its computer networks to adapt to increasing demands. As the organization embraces IT solutions, the automation control procedures are becoming more virtual. To guarantee the smooth operation of Kudler's computerized systems, an annual audit is necessary. The administrators at Kudler Fine Foods have indicated their interest in viewing the proposed audit timelines for all systems. They are particularly interested in understanding the various types of audits and their respective execution processes. Moreover, they wish to be informed about any complications that could hinder the reliance on computer-assisted auditing.

Audit Varieties

The primary goals of carrying out IT and financial assessments are to confirm the honesty, security, protection, and operational efficiency of Kudler's commercial operations. An in-house review offers a m


ore comprehensive comprehension of the precision and impartiality in their fiscal declarations. "This appraisal for objectivity conforms to Generally Accepted Accounting Principles (GAAP) and necessitates the application of generalized auditing norms" (Bargranoff, 2008).

A third-party audit is scheduled to evaluate the effects of Kudler's automated accounting systems on their financial records. The comprehensive test, which starts with an initial review, is among numerous strategies targeted at gaining proficiency. In addition, the audit will encompass a hazard evaluation. "There are several potential risk sources that could lead to substantial inaccuracies including outer influences like industry and environmental components of the business and internal factors such as its nature, operations, and regulatory supervision over financial reporting" (Audited No.12, 2012).

It is essential to evaluate the risks because the system management's strengths and weaknesses can determine the audit's

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scope. As indicated by Bagranoff (2008), implementing a risk-based audit approach enables auditors to comprehensively understand potential errors and irregularities in a company's AIS environment, along with their respective risks and susceptibilities.

Suggested Inspection

The suggested review for Kudler’s digital payroll, accounting, and purchase systems is the SAS 94 Audit given the significant volume of electronic transactions by the company. The examination will cover all application software to ensure the validity of data input, processing, output, access control and authorization, as well as error management and system log procedures (Bagranoff, 2008). Presently, Kudler implements a preliminary trial run before processing each payroll. Inspection of the output from this trial run checks all modifications to the employee's profile. Corrections are made to any errors or oversights and a second test run is produced (Kudler, 2011).

At the end of the final payroll evaluation, time records are downloaded and validated. The Purchasing Module receives comprehensive sales data from all stores and subsequently credits inventory accounts. Regular checks and assessments are conducted on the Purchasing Function. Information from this module is directly transferred to the AP module. A thorough audit takes place scrutinizing the operating system, database management system, and compliance with administrative procedures within both purchasing and payroll systems. Kudler Fine Foods' point of sale (POS) system records every retail sale in detail (Kudler, 2011). This detailed data is channeled into the general ledger, accounts payable, and bank reconciliation modules by POS system. As a component of audit processes, each cash register will undergo physical scrutiny along with environmental review to guarantee secure transactions.

Kudler utilizes the industry specific Retail Enterprise

Management System (REMS) software which consolidates all the organization's data and processes into a seamless Information System. The ERP system known as REM deploys a central database containing all data linked to the diverse system modules. For instance, the REMS enables exchange of information between the POS system and financial modules. The ideal audit method for this system would be observations and suggestions.

Kudler delegated the software tasks to Smith Systems Consulting, and they signed an annual contract for the firm to upkeep the REMS. While the resulting report from the findings and recommendations will not create a viewpoint, it will provide a summary of tasks completed and deliver an advisory review. The REMS incorporates built-in security features like passwords, monetary limits, and restricted access features. However, Kudler Fine Foods lacks formal policies or audits concerning these (Kudler Fine Foods, 2010).

In the audit, we will apply a risk-based strategy to evaluate Kudler's policies and procedures. The attribute sampling technique will be employed to scrutinize the internal controls of the POS System by monitoring sales transactions in every store. We will validate financial records from the REMS system and cross-reference them with retrieved bank statements using a variable sampling method against Kudler's bank reconciliation reports. Once all evidence has been collected and analyzed, we will make a comprehensive audit conclusion that assesses whether set goals have been met and whether established strategies worked effectively. Lastly, any considerable shortcomings or weaknesses discovered during the audit process will be pointed out for further action - this may involve requesting more documentation, carrying out another audit or arranging a telephonic conversation.

Auditing Without Using Computers

Although auditing without directly involving computers is not typically an efficient method in an electronic environment, there could be certain situations where this strategy is unavoidable. These might include scenarios such as inconsistency in payroll check sequences, anomalous codes, or repetitive time cards, which would necessitate the use of physical audit documentation. Similarly, if a particular control examination fails due to insufficient internal safeties or the existence of a system virus, there is a need for more rigorous testing procedures. In Summary.

The growth of Kudler Fine Foods has led to the integration of new system procedures, with the suggested audit being SAS94. The audit process will involve the use of attribute and variable sampling methods. A risk-based evaluation will be carried out, and any conditions discovered will be addressed.

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