Auditing Case Study: Issues of Mount Pleasant Coffee Growers Cooperative Limited

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Background and Issues of Mount Pleasant Coffee Growers Cooperative Limited2 Question 1 - Analytical Review Schedule of the farm and factory expenses3 Question 2 - Audit Program for factory Wages and Administrative Salaries paid7 Question 3 - Verification of the Coffee Industry Board Cess and the closing inventory of Coffee13 Question 4 – Completing the Appropriation Account of Mount Pleasant15

Question 5 - Presentation of simplistic financial Statements16 Question 6 – Questions and Answers for Shareholders24
Appendix27

Background and Issues of Mount Pleasant Coffee Growers Cooperative Limited

The formation of Mount Pleasant Coffee Growers Cooperative Limited (Mount Pleasant) was as a result of the demand by coffee growers in Jamaica for better prices for their coffee as well as their desire for access to plant services and loans with greater benefits. The operations of Mount Pleasant in 1980 included purchasing coffee beans from members, processing the berries, selling the processed coffee to Coffee Industry Board (CIB). Later in 1999, this was extended to include a sales and marketing arm managed by the CIB. Mount Pleasant was initially audited by Registrar of Cooperative Societies and later by Lopez and Company. The documents presented for analysis include the following:

* Significant Accounting Policies: Permanent File Update Statutory Reserve- Year- end December 2002 * Draft Balance Sheet as at December 31, 2002
* Factory Operations Account: Year- end December 2002
* Administrative and Selling Expenses: Year- end December 2002 * Surplus and Deficit Appropriation Account: Year- end December 2002 While being audited by the Registrar of Cooperative Societies, Mount Pleasant was warned that they needed to tighten their internal controls. However, Lopez and Company issued an unqualified report stating that internal controls were satisfactory. The 2002 financial reports of Mount Pleasant purport an accumulated deficit on the Surplus and Deficit Appropriation Account, increase in administrative expenses, and increase in liabilities. In light of the aforementioned, some improvements can be made to the internal controls of Mount Pleasant to enhance the performance of the company.

Question 1 - Analytical Review Schedule of the farm and factory expenses

The online documentation done by Hermes Baticulon and Lenard Ibadlit in their work “Analytical Review Importance and Risks”, explains in a simple and straightforward manner the purpose and use of an analytical review schedule. Baticulon and Ibadlit says, During the planning stage, the analytical review procedure enhances the auditor’s understanding of the client’s business and helps in identifying significant transactions and events that have occurred since the last audit date. It also identifies unusual transactions and events, amounts, ratios, or trends that might be significant to the financial statements and may represent specific risks relevant to the audit. Mount Pleasant analytical Review Schedule Reveals:

| | The Mount Pleasant Coffee Growers Cooperative LimitedFarm and Factory ExpensesTwo Years Ending 31 December 2002| Checklist| % Differences Increase or (Decrease)| | 2002$ ,000’s| % of Sales| 2001$ , 000’s| %of Sales| | | Sales | 2, 605| | 2,407| |

| | Administrative Expenses | | | | |
* | (0.62)| Salaries and Wages| 92| 3.53| 100| 4.15| * | 0.25| Staff Insurance| 13| 0.50| 6| 0.25|
| (0.05)| Canteen Subsidy| 2| 0.08| 3| 0.13|
| (0.05)| Uniforms| 3| 0.11| 4| 0.17|
* | 0.07| Office Rental, Security, Light & Power| 4| 0.15| 2| 0.08| * | (0.18)| Office Supplies Inc Printing & Stationery| 3| 0.11| 7| 0.29| | ----| Motor Vehicle Maintenance| 15| 0.58| 14| 0.58| * | (0.19)| Committee Meeting| 9| 0.35| 13| 0.54| * | (0.29)| Travelling & Subsistence| 2| 0.08| 9| 0.37| | ---|...
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