This is from Auditing QUESTION THREE Lite-Tech is a lighting distribution company with administrative offices located in

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This is from Auditing
QUESTION THREE
Lite-Tech is a
lighting distribution company with administrative offices located
in Toronto and Calgary. Its main products are commercial light
fixtures. The lights are purchased from China and sold to retailers
in North America. The company has 6 distribution centres located
throughout Canada and the United States.
A year and a half
ago, senior administration decided to implement an information
technology (IT) system at all distribution centres to address
concerns regarding inventory management. The main advantage of the
system was that it would allow sales staff easy access to inventory
information such as product availability. The system would
consolidate inventory information from the 6 locations and
automatically re-order inventory once a certain threshold was
reached. This would make cash flow management much more efficient
as items would only be re-ordered when necessary.
The IT system was an
off-the-shelf software customized to Lite-Tech’s needs. The
software vendor gave in-house training to Lite-Tech staff during
the implementation stage. The vendor trained 2 Lite-Tech staff
members to be the key support contacts at each of the distribution
centres. The staff members chosen for this task had only minimal IT
experience. Since the implementation, the software vendor has been
bought out twice by other companies and the level of support
available from the vendor has significantly decreased. In addition,
4 of the trained Lite-Tech staff members have left the company
because of the stress of dealing with the demands of the IT system,
and they have not been replaced.
At the time of
implementation, all staff members were granted access to the
system. This essentially gave purchasing power to all staff at
Lite-Tech. Access to the system was supposed to be limited shortly
after implementation; however, to date this has not been changed.
Recently, complaints from the sales staff regarding the accuracy of
inventory data in the system have prompted the president of Lite
Tech to request a review of the IT system and its controls. The
objective of the review is to determine if any risks or issues
exist with the system and, if so, to determine the impact of the
risks and to recommend improvements. The chief audit executive
(CAE) felt that his staff lacked the necessary skills to complete
this mandate and has hired you, a CPA, to conduct the review.
You have met with
several of the key staff who interact with the system on a daily
basis and gathered the following information:
Required
a). Write a memo for the review requested by the CAE.
b). Explain whether the CAE was correct in
assuming that a CPA would have the necessary skills and knowledge
to complete this mandate. Justify your answer.