Auditing Inventories; Cost of Goods Sold; And Property, Plant, and Equipment

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Running head: AUDITING INVENTORIES; COST OF GOODS SOLD; AND1Auditing Inventories; Cost of Goods Sold; And Property, Plant, andEquipmentName:AC410Unit 6Date:In your audit of Nolan Manufacturing Company, Happy Chicken, Inc., and internal controlprocedures for plant and equipment, you have identified several weaknesses and potential risks.Based on your analysis, explain how auditors can enhance the internal control over inventory andproperty, plant, and equipment, and how they can mitigate the risks of financial misstatements.Discuss your approach to auditing impairments, fair value estimates, and weaknesses in internalcontrol, including any necessary substantive procedures. Additionally, consider the role ofvaluation specialists and the importance of effective reconciliation in plant and equipmentcontrols.Word Count Requirement:1000-1200 words

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AUDITING INVENTORIES; COST OF GOODS SOLD; AND2Auditing Inventories; Cost of Goods Sold; And Property, Plant, and Equipment12–21. Nolan Manufacturing Company retains you on April 1 to perform an audit for thefiscal year ending June 30. During the month of May, you make extensive studies of internalcontrol over inventories.All goods purchased pass through a receiving department under the direction of the chiefpurchasing agent. The duties of the receiving department are to unpack, count, and inspect thegoods. The quantity received is compared with the quantity shown on the receiving department’scopy of the purchase order. If there is no discrepancy, the purchase order is stamped “OK—Receiving Dept.” and forwarded to the accounts payable section of the accounting department.Any discrepancies in quantity or variations from specifications are called to the attention of thebuyer by returning the purchase order to him with an explanation of the circumstances. Norecords are maintained in the receiving department, and no reports originate there.As soon as goods have been inspected and counted in the receiving department, they aresent to the factory production area and stored alongside the machines in which they are to beprocessed. Finished goods are moved from the assembly line to a storeroom in the custody of astock clerk, who maintains a perpetual inventory record in terms of physical units, but not indollars.What weaknesses, if any, do you see in the internal control over inventories?1.Aweaknessesof Nolan Manufacturing Companyis that the configuration of controlof the inventories is lacking structurebecause ofthe fact the same purchasing agent isin charge of the receiving department. Typical duties should be segregated and

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