Zou's Fencing Controls

1936 words 8 pages
Case II report
Shasha Chen Professor: Dr. Maureen Mascha Date: 11/09/2014

Case II report
Shasha Chen Professor: Dr. Maureen Mascha Date: 11/09/2014


Auditors should always evaluate the design and test the operating effectiveness of a company’s internal control. The key procedures of the evaluation of design are fulfilled by inquires, observations, and inspections. The same procedures can be used to test the operating effectiveness as well.
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Additional audit evidence should be obtained to determine if any significant changes are made to influence the auditors’ opinion after interim procedures. As the case stated, risk #1 and risk #3 are not significant risks, inquiry and inspection generally are enough for the roll-forward period. For risk #2, which is classified as a significant risk, even though auditors only use inquiry during the roll-forward period, auditors may expand the extent of testing if any significant changes are found.
Work of others considerations
Auditors could use some work of others from a company’s internal audit team. PCAOB standards require that auditors should first evaluate the internal auditors’ integrity and professional capacity. If auditors decide to use the others’ work, auditors need to evaluate the quality and effectiveness of the work. In ZOU’s case, auditors decide not to rely on any work of others.
Overall speaking, there are some deficiencies exiting in ZOU’s Fencing audit. First, auditors should perform analytical procedures in the preliminary planning stage to obtain understanding of the company. Auditors in this case do not perform any analytical procedures before they design audit procedures. What’s more, Auditors violate the standards of fieldwork. ZOU’s Fencing uses a sophisticated warehouse management system, which provides difficulty for auditors to understand and perform tests. Second, when considering


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