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  • Problem 5

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    Marvin Ako Si
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    The purpose of the four key controls are: 1) Transaction authorization ensures all transactions are valid and according to objectives. Authorizations can be general or specific. 2) Complete and accurate record keeping captures the economic essence of transactions and provides an audit trail for operations and audits. 3) Physical controls deal with identified organizational risks. 4) Internal verification allows management to assess performance, transaction integrity, and data accuracy. The document then discusses violations of these controls at Oakdale including: 1) Purchasing long term securities without treasurer authorization. 2) Lacking purchase and sale authorizations. 3) Missing journal entries and source documents for short term investments.

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    The purpose of the four key controls are: 1) Transaction authorization ensures all transactions are valid and according to objectives. Authorizations can be general or specific. 2) Complete and accurate record keeping captures the economic essence of transactions and provides an audit trail for operations and audits. 3) Physical controls deal with identified organizational risks. 4) Internal verification allows management to assess performance, transaction integrity, and data accuracy. The document then discusses violations of these controls at Oakdale including: 1) Purchasing long term securities without treasurer authorization. 2) Lacking purchase and sale authorizations. 3) Missing journal entries and source documents for short term investments.

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    29 views3 pages

    Problem 5

    Uploaded by

    Marvin Ako Si
    The purpose of the four key controls are: 1) Transaction authorization ensures all transactions are valid and according to objectives. Authorizations can be general or specific. 2) Complete and accurate record keeping captures the economic essence of transactions and provides an audit trail for operations and audits. 3) Physical controls deal with identified organizational risks. 4) Internal verification allows management to assess performance, transaction integrity, and data accuracy. The document then discusses violations of these controls at Oakdale including: 1) Purchasing long term securities without treasurer authorization. 2) Lacking purchase and sale authorizations. 3) Missing journal entries and source documents for short term investments.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
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    of 3

    Problem 5 Questions a.

    Purpose of each of the four control listed y Authorization of transaction The purpose of transaction authorization is to ensure that all material transactions processed by the information system are valid and in accordance with management s objectives. Authorizations may be general or specific. General authority is granted to operations personnel to perform day-to-day activities. On the other hand, specific authorizations deal with case-by-case decisions associated with non routine transactions. Complete and accurate record keeping The accounting records of an organization consist of source documents, journals and ledger. These records capture the economic essence of transactions and provide an audit trail of economic events. The audit trail enables the auditor to trace any transactions through all phases of its processing from the initiation of the event to the financial statements. Organizations must maintain audit trails for two reasons. First, this information is needed for conducting day-to-day operations. Second, the audit trail plays an essential role in the financial audit. y Physical control To ensure that appropriate actions are taken to deal with the organization s identified risks. All systems, regardless of their sophistication, employ human activities that need to be controlled. y Internal verification Through these, management can asses (1) the performance of individuals, (2) integrity of the transaction processing system, (3) the correctness of data contained in accounting records. y

    b. Area in Oakdale s investment procedures that violates each of the four controls y Transactions Purchase of long term securities that were executed by the treasurer y Documentation Purchase and sales authorizations y Accounting records Journal entries of the short-term investment c. Violations identified, Oakdale can correct it by. y There should be an authorization from the president y There should be a proper way of recording short term investment y All source documents must be present.

    Problem 7 a. System Flowchart Sales Department Approved sales Stock release Sales order Update Inventory Shipping Department

    Sales order Sales order

    Temporary file

    Terminal

    Inventory ledger

    Supplier A/P clerk Warehouse

    Sent to Sent to Filed

    Purchase order Purchase order Purchase order

    Update

    Receiving report

    Is associated with

    A/P Department

    b. Any control problems in the system y Documentation or complete or accurate accounting records y Segregation of duties y Independent verification y Supervision c. Sorts of fraud y Transaction fraud y Operation fraud y Management fraud

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