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  • 7.21. Case Impact On Control Risk Key Account Assertion Affected

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    Thiện Phát
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    This document summarizes key controls related to inventory, accounts payable, accounts receivable, and cash. It discusses three cases where control risk would increase: 1) Where items are recorded in inventory/accounts payable before being received, 2) Where debtors may not be creditworthy so receivables could be overstated, and 3) Where bank reconciliations do not occur so fictitious transactions could be included. It also summarizes strengths like passwords and timesheet authorization, and procedures for payment requisitions, invoice checking, and CFO approval to help prevent fraud and ensure accuracy and completeness.

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    7.21-7.22-8.24

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    This document summarizes key controls related to inventory, accounts payable, accounts receivable, and cash. It discusses three cases where control risk would increase: 1) Where items are recorded in inventory/accounts payable before being received, 2) Where debtors may not be creditworthy so receivables could be overstated, and 3) Where bank reconciliations do not occur so fictitious transactions could be included. It also summarizes strengths like passwords and timesheet authorization, and procedures for payment requisitions, invoice checking, and CFO approval to help prevent fraud and ensure accuracy and completeness.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    13 views2 pages

    7.21. Case Impact On Control Risk Key Account Assertion Affected

    Uploaded by

    Thiện Phát
    This document summarizes key controls related to inventory, accounts payable, accounts receivable, and cash. It discusses three cases where control risk would increase: 1) Where items are recorded in inventory/accounts payable before being received, 2) Where debtors may not be creditworthy so receivables could be overstated, and 3) Where bank reconciliations do not occur so fictitious transactions could be included. It also summarizes strengths like passwords and timesheet authorization, and procedures for payment requisitions, invoice checking, and CFO approval to help prevent fraud and ensure accuracy and completeness.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 2

    7.21.

    Case Impact on control risk Key account Assertion affected


    - Increase in control risk inventory or - Existence
    - Because there is no accounts - Because items are being
    control to ensure goods payable recorded in inventory and
    A are actually received accounts payablebefore
    beforeaccounts payable inventory is received or
    is credited before the client has a legal
    obligation to pay
    - Increase in control risk accounts - Accuracy, valuation and
    - Due to the absence of receivable allocation
    the previous control of a - Because the debtors may
    B credit check not be credit-worthyand so
    the carrying value of
    receivables may be
    overstated.
    - Increase in control risk cash at bank - Existence and completeness
    - Because an important - Because fictitious
    control over bank transactions could be included
    C receipts and payments orgenuine transactions
    —that is,monthly bank omitted.
    reconciliations—does
    not exist

    7.22.

    Weakness Strength
    IT system is controlled by usernames System passwords help prevent
    and passwords, which are required to unauthorised access to the IT system
    be changed through a programmed
    system prompt
    Timesheets are authorised by Independent authorisation guards
    supervisors and checked against the against payments to non-existent
    paysheet and authorised by the CFO, employees and payments of incorrect
    Peter, before payments are processed amount
    - Authorisation

    8.24.
    1. All payments prepared by the clerk include a pre-numbered bank
    transferrequisition:
    (a) to prevent and detect non-recording of payments
    (b) accounts payable (and related expense/asset) completeness—(ensure
    allpayments are recorded)
    (c) sequence check to ensure that all pre-numbered bank transfer requisitionsare
    accounted for.
    2. The bank transfer requisition requires the clerk to confirm that they have
    performed the following procedures for each payment:
     Checked the additions and prices on the invoice
     Confirmed the details on the invoice have been matched to a delivery note
    by the warehousing department
     Verified a valid purchase order exists for the goods
    (a) To prevent unauthorised access to company funds (fraud/theft) by
    ensuringpayments are only made for goods received and ordered by the
    companyand are recorded for the proper amount.
    (b) Expense/asset—occurrence and accuracy in relation to the expense (is it areal
    transaction and is the amount correct?) or existence and accuracy,valuation and
    allocation (do the assets purchased exist and have they been recorded at the
    proper amount?)
    (c) Review a sample of bank transfer requisitions and ensure all procedures have
    been completed. Re-perform checks for a sample of requisitions.
    3. The clerk forwards the bank transfer requisition together with any supporting
    documentation (invoice and any other relevant correspondence) to the CFO
    forapproval: Select a sample of invoices and check arithmetic accuracy and
    evidence of check being completed

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