Management Has Centralized Purchasing and Uses a Model Based Upon

question 26

Multiple Choice

Management has centralized purchasing and uses a model based upon previous year's sales with adjustments for trends in the market place (e.g. ,the trend to more casual shoes) .A staff auditor has suggested that the centralized purchasing may be one of the reasons for the lower level of profitability in the Mid-Central Region.Which of the following would be the best single audit procedure to address the staff auditor's assertion?

• A)Take a sample of receiving documents at stores and trace to purchase orders to determine the length of time between the purchase and delivery of the goods.
• B)Interview store managers in the Mid-Central Region to determine their attitude toward centralized purchasing.
• C)Perform an inventory count at selected stores in the Mid-Central Region and determine if adjustments are needed to the perpetual records.
• D)Perform a product-line analysis of sales and purchases in the Mid-Central Region and compare with other regions.

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Definitions:

Return On Investment

A measure used to evaluate the performance of an investment by dividing the net profit by the initial cost of the investment.

Cost Variance

The difference between the estimated cost of a project or operation and the actual cost incurred.

Balanced Scorecard

A strategic planning and management system that organizations use to communicate what they are trying to accomplish, align day-to-day work with strategy, and monitor performance against strategic goals.

Not-for-profit

Organizations that operate without the primary goal of financial profit, often focusing on social, educational, or humanitarian objectives.