I will provide the link for each question. Picture #1 is question #1, picture #2and3 is question #2, and picture #4 is question #3, for question # 1 I have a little detail about the case . The audit plan (sheet C-0) is provided so that you can understand the work you must complete. Please be sure to read each tab at the bottom of the worksheet screen for guidance. Make sure you follow the instructions to enter an answer on each workpaper that has a green space highlighted.
Internal controls are critical to any audit. Auditors’ considerations of internal controls begin as a risk assessment process while auditors understand the design of internal controls. After an initial assessment is made auditors may engage in testing the operation of internal controls. Both understanding the design and testing the operation are key factors in decisions about substantive procedures. This case helps you transition out of risk assessment procedures and into testing internal controls. You are asked to complete both the risk assessment related to internal controls by identifying and creating a flow chart for the purchasing cycle, and testing internal control operations in the revenue cycle. Begin with testing the operation of the revenue cycle which has been mostly completed by other teammates. This helps you see that the focus of internal control testing is centered on whether the internal control action was completed and documented. Use the work done by other auditors as a guide to complete the understanding of the design of controls related to the purchasing cycle. Model that auditor’s work as closely as possible.
The purpose of this mini case is to help you transition from risk assessment procedures into tests of internal controls. In the following cases the work will center on substantive procedures. It is important to understand why internal control testing is performed before substantive procedures. Hopefully, completing this assignment will help you see how this knowledge would be useful to an auditor seeking evidence of transactions and balances and will make internal control testing more understandable.
General Procedures:
Task:
Review the auditor documentation done by other teammates.
Complete operations testing of revenue internal controls using voucher packets provided.
Identify internal controls related to the purchasing cycle using the client prepared narrative.
Prepare a workpaper to test the operations of internal controls over purchasing.
To prepare the list of internal controls for the purchasing cycle and place them on your worksheet, you should carefully read the purchases procedures. That is where the company identifies the things that must be done in order to properly process that information. You are looking for things like: who authorizes the purchase and how is that authorization shown on the related paperwork? You can follow the internal controls for the revenue cycle that are provided in the case for examples of how to write your list.
Deficient controls
When deficient controls are identified, auditors would need to understand the failure and document that and any further impact on the audit. If there is a control over revenue (e.g., invoices are reviewed for correct prices, products, quantities and customer information) that does not operate effectively it is likely that the auditors would increase the nature, timing, or extent of procedures related to sales valuation.
Management Assertions
Every internal control should protect the accounting data from a violation of one or more of the management assertions. Don’t forget how pervasive and important they are.
