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8.24 MEDIUM
While working on the audit of Cosmopolitan Ltd, you are involved in a review of
control activities in the cash disbursement area. As part of your review, you have noted
the following procedures:
1. All payments prepared by the clerk include a pre-numbered bank transfer
requisition.
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.
3. The clerk forwards the bank transfer requisition together with any supporting
documentation (invoice and any other relevant correspondence) to the CFO for
approval.

REQUIRED
For each of the three controls identified above:
(a) Describe the purpose of the control-what is the control designed to prevent or
detect?
(b) Identify the account(s) and assertion(s) that this control will have an effect on in
the financial report.
(c) Give one example of a procedure that could be used to test the control. “

1. The clerk ensures that all payments made include a bank transfer requisition with a
unique number for various reasons:
(a) to prevent and identify instances where payments are not recorded,
(b) to ensure the completeness of accounts payable and related expenses/assets by
confirming the recording of all payments, and
(c) to conduct a sequence check, guaranteeing that every pre-numbered bank transfer
requisition is properly documented.
2. The bank transfer requisition mandates that the clerk verifies specific procedures for
each payment, including:
● scrutinizing additions and prices on the invoice,
● confirming that invoice details align with a delivery note validated by the
warehousing department, and
● confirming the existence of a valid purchase order for the goods.
(a) This is aimed at preventing unauthorized access to company funds (fraud/theft) by
ensuring that payments are only made for goods received and ordered by the company
and are accurately recorded.
(b) It pertains to ensuring the occurrence and accuracy of expenses/assets concerning
the transaction's legitimacy and correct amount, or the existence and accuracy,
valuation, and allocation of purchased assets.
(c) The process involves reviewing a sample of bank transfer requisitions to ensure
completion of all procedures and re-performing checks on a subset of requisitions.

3. The clerk submits the bank transfer requisition, along with supporting documents
like invoices and relevant correspondence, to the CFO for approval:
(a) This step is designed to prevent unauthorized access to company funds (fraud/theft)
by ensuring that all payments receive approval from a suitable company official. The
approval process also serves to prevent errors in accounting entries, as the approver
meticulously reviews the details.
(b) It involves verifying the occurrence and accuracy of expenses/assets in terms of the
legitimacy and accurate amount of the transaction or the existence and accuracy,
valuation, and allocation of purchased assets.
(c) This entails reviewing a sample of bank transfer requisitions to confirm the
presence of authorization evidence.