CHAPTER IINTRODUCTION
1.1 Background ResearchInventory account is an account of complex and require a strong control for several reasons. First, inventory is one of the main part of the balance sheet and is often the largest estimates that involve working capital. Then, the inventory is often too scattered in several locations that complicate the calculation and physical pengendaliaan. The assessment was complicated by obsolescence factor and the need to allocate manufacturing costs into inventories.Inventories for manufacturing companies is a very material item because most of their working capital used to meet the supply. So on account of inventories requires a good internal control. As at the time of our country stricken by flood, it could be the company suffered huge losses because the company can not anticipate. Pengantisipasian accuracy of material losses that may result from floods or other things that could predict enable the company to not experience huge losses. Especially for companies that have a warehouse supplies in various places and have a supply which is a consignment of goods in warehouse storage.In addition, with the spread of inventories at various places allow inventory fraud, if the company's internal controls can not prevent it.Given the magnitude of risk that can arise in the supply system, these companies try to design effective internal controls within the inventory system.Internal control is created within the company is very important for companies whose financial statements must be audited by public accountants, internal control is in addition to affecting the reliability of the information will also affect the extent of the scope of testing to be performed by public accountants in particular substantive tests that depend on internal controls designed and implemented by the client. In addition, effective internal control system will greatly affect the risk controls established by the auditor in auditing the financial statements of the client and the amount of evidence should be collected and substantive testing procedures for client inventory balances.In conducting an audit of a financial report there are risks to be found by auditors. Risks include the risk of congenital (inherent risk), risk control (control risk), risk findings that are planned (planned detection risk), and audit risk that is acceptable (acceptable audit risk).Risk control can only be determined if the auditors have sufficient understanding of internal control system client. This risk is determined to provide guidance on the auditor on the effectiveness of internal control system itself. Because as we all know that an effective internal control system will affect the financial statements to be examined.In such a complex inventory system makes the auditor should understand the internal control system applied to the client so that the set can control risk as carefully as possible. This will affect the type of tests to be carried out by the auditors.Based on the above description, the authors want to lift the title is "THE ROLE OF RISK CONTROL TESTS ON SUBSTANTIVE SCOPE OF THE BALANCE OF SUPPLY"
1.2 Identification of ProblemsBased on background research on the above issues will be raised is ""What about the role of risk control over the scope of substantive tests for inventory balances client?"
1.3 Objectives ResearchBased on the above problems purpose of this study was to obtain information about the role of risk control over the scope of substantive tests for inventory balances client.
1.4 Benefits of Research
The data and information and the results obtained from this study are expected to be particularly useful for:1. Authora. Can add insight and knowledge in the field of auditing, particularly in risk control over the scope of substantive tests of inventory balances.b. To comply with one of the graduate exams S1 courses at the University Accounting Department Widyatama.2. Auditors, the authors hope to provide useful information in improving the performance of auditors.3. Community, particularly in universities Widyatama University, the results of this study is expected to be useful to broaden the horizon and can be used as a reference or further study material.
1.5 Framework for ThinkingIn auditing there are 5 kinds of tests according to Arens & Loebbecke translated by Amir Abadi Jusuf (1999: 310), namely:1. The procedure to obtain an understanding of internal control structure2. Tests of control3. Substantive tests of transactions4. Analytical Procedures5. Detailed testing of the balance.Of the five tests on substantive testing of a test that requires the greatest cost. This test is intended to provide assurance to the auditor on the balance shown in the balance.According to the book auditing purposes Mulyadi substantive tests of balances of inventories are:1. Getting a conviction about the reliability of accounting records concerned with inventory.2. Proving the existence assertion stocks listed on the balance sheet and the occurrence of transactions related to stocks3. Proving completeness assertion related to the preparation of transactions recorded in the accounting records and the completeness of the balance of stocks that are presented in the balance sheet.4. Proving assertions client ownership rights over the stocks listed on the balance sheet.5. Proving assertions tercantumkan stock assessment in the balance sheet.6. Proving assertions presentation and disclosure of inventories in the balance sheet.
In all the systems contained in the company, management needs to establish an effective control system for operating the system is running properly and supervised. Therefore need to be made a system of internal control over each cycle is appropriate. In general, control activities consist of:1. Policies2. These procedures are designed to provide reasonable assurance that management goals and objectives can be achieved.Internal control is a process, which is influenced by the board of directors, management and other personnel in an entity that is designed to provide reasonable assurance regarding the achievement of objectives consisting of the reliability of financial reporting, compliance with laws and regulations, as well as the effectiveness and efficiency of operations (Boynton & Kell, 1996:254)In order to achieve the effectiveness of Internal Control System, the client needs to implement good internal controls in all systems, including systems of internal control inventories. While the primary purpose of internal control by Hiro Tugiman (1997:44) is to ensure:1. "Reliability (reliability and integrity) of information2. Compliance with policies, plans, procedures and statutory provisions3. Protection of organizational assets4. Use resources economically and efficiently5. The achievement of various goals and targets. "
Control activities in addition to policies and procedures are also included:1. Adequate segregation of duties.2. Proper authorization of transactions and activities.3. Documents and records are adequate.4. Physical control over assets and records.5. Independent checks on the implementation.Once auditors have sufficient understanding ataclient s internal control structure, according to Arens, et al are translated by Tim Dejacarta (2003:420) there are four specific assessment to be made, namely:1. "Specifies whether the financial statements to the audit client.2. Setting the level of control risk is supported by the understanding gained.3. Establish whether the expected level of risk lower control can be supported.4. Deciding the level of risk assigned an appropriate control to use. "
A good control system will be able to suppress the occurrence of errors and irregularities within the bounds of reasonable costs and even if mistakes and deviations from this can be identified and resolved quickly (Theodore M. Tuanakotta, 1982:96)Inventories according to the dictionary of accounting terms are merchandise or inventory in the hands or on a journey at a certain time.
The estimates that can be classified as inventories are:1. Raw materials (Raw material)2. WIP (Work in process)3. Finished goods (Good Finish)4. Equipment (supplies), supplies and spare parts (spare parts)
While the definition of inventory and warehousing cycle by Arens & Loebbecke (1999, 620) are:"Alloys of the two systems separate but closely related. The first is the physical flow of goods and the second is the associated costs. While stocks move in the company, there must be a pretty good control over physical movement as well as associated costs. "
An examination of the functions that form the cycle of inventory and warehousing will help auditors understand the control and material evidence must be collected to test its effectiveness.The relationship between tests of controls and substantive tests are:1. The auditor may perform substantive tests of large cost if internal controls are weak.2. The auditor may perform substantive tests along with tests of controls in a low proportion of effective internal controls.3. The auditor may perform substantive tests with tests of controls if a strong internal control.
Figure 1.1.Picture no. 1.1 Framework for ThinkingSource: Adoption of several books Auditing (Mulyadi, Arens & Loebbecke, Sukrisno Agoes, Dan M. Guy et al)
Explanation:CR: Risk Control
1.6 Limitation Problem1. This study will only examine the role of risk control over the scope of substantive tests for inventory balances clients only.2. Testing is done with the kind of substantive testing tests details of balance
1.7 Research MethodologyIn preparing this thesis, the research method used in this research is descriptive method with approach of case studies. According to Moh. Nazir, PhD (2003: 54-55), a descriptive method that is a method in researching the status of a group of people, an object, a set of conditions, a system of thought or an event on the present which aims to create a description, picture or painting in a systematic, factual and accurate information on the facts, the properties and the relationship between the phenomena being investigated. Literally, the descriptive method is a method of research to create a picture of the situation or event, so this method intends to hold a mere accumulation of basic data.While data collection techniques used by the authors include:1. Field Research (Field Research)Engineering research is conducted to obtain primary data by:a. Interviews, ie questions and answers with the public accountants and other parties concerned in this study.b. The questionnaire is a data collection technique in which the author makes the questions regarding the role of risk control over the scope of substantive tests of inventory balances.2. Research Library (Library Research)The research literature is intended to obtain secondary data source information from experts or writers who are competent in discussing the problems examined by collecting the materials in order to obtain a theoretical insights and support the process of discussion of factual data.
1.8 Location and Time studyResearch will be conducted at Public Accounting Firm (KAP) KOESBANDIJAH, BEDDY Samsi & Setiasih Jl. KHP. Hasan Mustafa no.58 Bandung. Implementation of this research will be conducted from June 2005 until October 2005.
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