Senior person

A person with appropriate authority

A person from appropriate level of management

Deficiency Recommendation
Requisition forms do not require Requisition forms must be authorised by a senior person,
authorisation. This increases the any unauthorised forms should not be processed further.
risk of fraudulent transactions and
could result in unnecessary cash
outflows.

The approved supplier list was The supplier list must be updated and reviewed regularly at
updated 24 months ago. least on an annual basis.
Since the supplier list was updated
24 months ago the supply provided
may not be ideal in terms of
quality, price and delivery time
leading to unnecessary cash
outflows.
Deficiencies Recommendation
credit limits are subsequently set Must be set by authorised person
by the receivables ledger clerks

no replacement has been An alternative credit controller must

appointed for credit controller. be appointed and all duties related to
credit controller must be performed.
Master data file is updated by The access to the master data file
receivable ledger clerks. must be only provided to authorised
person and ledger clerks must only
be able to access or edit master data
after proper authorisation from
authorised level of management.
Goods dispatch is not sent to sales New copy must be sent to sales order
order department. department.
Unfulfilled orders might occur
causing customer dissatisfaction.
Temporary staff
Lack of experience
10% discount Must be automated with invoice
Sales price list updated every six
months
Customer statements not sent out
-loss of customers
-bad or doubtful debts
Only reconciled at year end Must be reconciled on a monthly
basis.
Unadjusted difference might occur
leadind to material misstatements
Internal control format

Deficiency Recommendation Test of control (TOC)

Include in
sentence:
 Procedure
 Doc/information
 Purpose
Deficiency Recommendation Test of control
Employees swipe their cards Must be reviewed by an Observe weather an
at the beginning and end of authorised person. authorised person is
the eight‐hour shift and this reviewing the swipe in and
process is not supervised. swipe out of the employees

Unwanted payroll expense

employees do not need to A supervisor must be observe if the employees
clock out to access the appointed to ensure that are supervised by senior
dining area. the employees are not person to swipe in and out
taking excessive breaks. to prevent payment for
unproductive hours.
Appointments of temporary
staff are made by factory
production supervisors.
. Overtime reports which
detail the amount of
overtime worked are sent
out quarterly
Bronze pays a discretionary
bonus every six months to
factory staff; the production
supervisors determine the
amounts to be paid.
the bonus is input by a clerk
into the system.
the payroll manager reviews
the list of the payments and
agrees to the payroll
records prior to authorising
the bank payment. If any
changes are required, the
payroll manager amends
the records.
For employees paid in cash,
the pay packets are
prepared in the payroll
department and a clerk
distributes them to
employees; most of these
individuals does not require
proof of identity.
Audit risk
(12-16 marks)

Risk of giving an inappropriate opinion on the FS when the FS are materially

misstated.
Audit Risk

Detection risk
Inherent Control risk
Risk

Inherent risk
From company’s side
Control risk
Detection risk (from auditor’s side)

Audit risk Auditor’s response

 Identification (same as question).  Procedure
 Accounting treatment.  Document/information
 What is the effect if accounting  Pourpose
treatment goes wrong.