The purpose of the internal audit is to protect Costco 's assets through evaluating the acceptability and efficiency of internal controls; recognizing areas of possible risk, revenue improvement and/or cost reductions; and making sure transactions are authorized, completed, and logged as proposed. The internal auditors are accountable for guiding audits of all Costco’s local and global activities, its affiliates, and other entities Costco conducts business with as deemed necessary by management.
During the planning stages of the audit, auditors will obtain an understanding of Costco’s inventory processes including related policies and procedures, location of warehouses, and the nature of inventory and it will be done with the following procedures:
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Auditors will assess the accuracy of inventory count and movement procedures. Auditors will also discuss any analytical procedures performed that are linked to inventory and talk about it with management about any substantial changes or strange developments in inventories.
The auditors will also ask about warehouse locations, volume, types of inventories, and any high value items. Auditors will also review working papers by internal auditors, if appropriate, and working papers by prior external auditors to identify high risk areas and areas that require special attention. We will train ourselves with the environment of inventory and deliberate the need for professionals to verify some special items, such as electronic devices.
We will also review the accounting policies and the methods associated to inventory and any indifferences in presentation of accounting method. Auditors will also ask about, if any, outside vendors that maybe linked to inventory management and if we have the right to audit.
Once there’s and understanding for Costco’s inventory process is gained, auditors will perform test of control to determine Costco’s internal
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We will also be tracking down direct verification of inventory that is held by public warehouses or outside keepers. Auditors will think through Costco’s actions for assessing warehouse’s performance, internal auditor’s report on warehouse’s internal control, and reconcile Costco’s record of inventory to warehouse’s statement. We will also account for any crack in receiving and shipping records. Auditors will test for appropriate authorization for inventory purchase, obtain purchase journals linked to vendor’s accounts, receiving reports and purchase orders. We will also review right of entry to accounting system linked to inventory to decide relevance of system access, review relevance of inventory write-offs and track the moving of inventory from one warehouse to receiving of the other warehouse.
Auditors will then perform test of balance to authenticate Costco’s inventory balance: they will also apply IDEA (Interactive Data Extraction and Analysis) to settle the physical inventory records to the general ledger account balance to recognize possibly exaggerated inventory. Auditors will examine and ask about any major reconciling item, trace inventory records for reflection of inventory to prove actuality of inventory, propose proper roll-forward actions from the date of inventory count to period- end including tracking down new purchase orders to
Even though internal controls do not always work, every entity that has workers should have internal controls. Internal controls protect entities from dishonest workers. Internal controls are a series of checks and balances. The Sarbanes-Oxley Act of 2002 was needed to gain control of accounting improprieties. Dishonest accounting has cost company employees millions of dollars in retirement funds. It has also cost investors millions of dollars.
The audit committee must certify that the company’s auditors are independent. The audit committee must approve all professional services provided to the company by its independent auditors and ensure that auditors do not provide to the company any of the specifically prohibited services identified by SOX, such as bookkeeping services. The audit committee must receive and analyze key items of information from the independent auditors. These items of information include auditors’ analysis of critical accounting policies adopted by the
The company has a very good inventory control system. After they are able to locate good quality suppliers that are able to meet the demand of the company, they then strive to maintain those relationships. They have systems in place to forecast their future needs and then have set out to be able to maintain a supply on-site so they can meet the demands and not run out of the product. They also need to make sure that they are able to store the materials so that they are able to maintain the quality that the company needs.
Costco Wholesale Corporation is an international chain of membership warehouses operating on the concept that offering members lower prices will produce high sales volume and rapid inventory turnover (“Annual Report” 4). While Costco warehouses are designed to help reduce costs for small-to-mid-sized companies, memberships are also available for individuals (“Company Profile”). The two memberships offered by Costco include Business and Gold Sta...
In order to be successful in business, a company must be able to track their assets. This tracking system is typically done by a bookkeeper and must be reliable in order to be effective. The way a company ensures their financial records are reliable is by setting up a system of internal controls. Internal controls allow a company to protect its assets from fraud and theft as well as ensuring records are kept accurately by reducing errors and irregularities (Keisco, Kimmel and Weygandt, 2008). Internal controls work by assigning responsibility, separating duties to provide checks and balances, hiring an independent verification agent and through the use of technology and physical controls. In many instances, internal controls are required and overseen by the Sarbanes-Oxley Act of 2002.
Accuracy: All Purchases are authorized at the appropriate level. All invoices prices and quantities are compared with purchase orders and receiving reports. Journal entries are review at the appropriate level. All the Financial statements are review and approved by the senior level.
Develop tighter standards for inventory control. Work with suppliers to account for incoming inventory and compare stock levels to sales to determine losses. Identify ways implement loss control measures such as security, both physical and electronic surveillance, employee engagement with customers, and through ethics training with employees to prevent internal losses. Utilize inventory control measures further to develop a charitable donations program to allow donations of day old products to local food banks and other organizations such as schools, churches and for community fundraising events. For example, inventory day old products creating a list of items to be donated. Have inventory signed off by at least two members of staff, one of which should be a supervisor or store manager. Have a representative of the receiver of the donation review the list for accuracy and also sign off on the inventory list. Donation lists can then be used for regular inventory tracking and also as tool for proving tax deductible charitable donations for the company. This will foster higher ethical behavior for the company’s staff, lower losses due to consumer theft, and begin to create an environment of community involvement and charitable
Accounts Receivable has good separation of duties and strong internal controls such as control numbers and reconciliations to sales and bank statements. One weakness in the Accounts receivable system is the accounting supervisor approves summary entries and reconciles the general ledger account, which could indicate a weakness with segregation of duties. We recommend that the controller approves of summary entries to segregate these duties.
Being a stocker for Costco Wholesale is a straightforward job. The stocker comes in each morning and presents with the day’s tasks. The stocker is monitored throughout the day by the department manager to make sure all tasks are being met in a timely manner. Costco Wholesale works less like a business and more like a well-tuned machine. If one cog in a machine is faulty or rusty, then the whole system will run inefficiently.
...s with the maintenance of equipment. The definition of inventory management is “Inventory Management is a discipline that encompasses the principles, concepts and techniques for determining what to order, when to order and how much to order. The right amount of inventory involves the balance between what is required to service your customers and what is financially practical.”
Accounts receivable balances are tested by sending confirmation letters to customers to obtain objective assurance that the balance is correct. The auditor also chooses sales transactions from the sales ledger and verifies that there are legitimate sales receipts to back up the transaction. To test the accuracy of the sales figure, the auditor reviews sales transactions in the ledger close to the financial statement date to ensure that the company only included sales prior to that date.” What Are the Audit Procedures for the Sales & Collection Cycle? (n.d.).
Subsequent to obtaining the accounting information, managerial accountants will then proceed to use it to plan, evaluate the company performance and also control the business operations. With regards to planning, the managers are required to make decisions concerning the kind of product to introduce into the market, when to introduce the product and where the production should take place. In performance evaluation, individual product lin...
It is undeniable that Inventory Management is an important key to success at Walmart this paper will discuss the two main methods of Inventory Management used by Wal-Mart: Material Requirements Planning and Just-in Time. Next we write about the technical means of keeping track of inventories like RFID tags. We conclude with discussing how
Auditing has been the backbone of the complicated business world and has always changed with the times. As the business world grew strong, auditors’ roles grew more important. The auditors’ job became more difficult as the accounting principles changed. It also became easier with the use of internal controls, which introduced the need for testing, not a complete audit. Scandals and stock market crashes made auditors aware of deficiencies in auditing, and the auditing community was always quick to fix those deficiencies. Computers played an important role of changing the way audits were performed and also brought along some difficulties.
Inventory can be explained as any assets that are held for future use or sale. Inventories are held for a variety of reasons, such as customer demand for end items, smoothing production, a hedge against stock outs and price increases, and economical purchasing. It is very costly and wasteful to keep large inventory on hand. The new technology and application quantitative tools and techniques for inventory management have permitted decrease in inventory. Top management needs to understand the role that inventories have on a company’s financial performance, operational efficiency, and customer satisfaction and strike the proper balance in meeting strategic objectives. They are responsible in keeping sufficient inventories to meet demand of the customers by sustaining the lower cost as possible. Inventories are required for a business to operate efficiently and effectively. Inventory management is a very significant part of basic operations activities. Most businesses and general organizations obtain most of their revenue through the sale of inventory.