info gotten wrong ch5

Question 1

Finance controller counts petty cash on a monthly basis- what kind of a control is this?

Answer 1

physical or logical control

Question 2

best sources of info on a company’s system

Answer 2

1. company’s procedure manual
2. internal audit function’s system notes
3. inquires made of company staff

Question 3

2 inherent limitations of a system of internal control

Answer 3

1. lack of understanding of purposes of control

2. possibility staff will collude in fraud

Question 4

True or false: cost of implementing controls may be more expensive than cost of any potential risk arising

Answer 4

True

Question 5

functions that should ideally be segregated

Answer 5

1. authorisation of transaction
2. custody or handling of asset
3. recording of transactions

Question 6

true or false; audit committees are not responsible recommending appointment of external auditor

Answer 6

false

Question 7

true or false; one of the roles of audit committee is to review integrity of formal announcements relating to company’s performance

Answer 7

true

Question 8

1. document counts
2. programmes matching of input to an expected input control file

are they controls over input authorisation or completeness?

Answer 8

completeness

Question 9

which control procedure is most likely to ensure customers are invoiced for goods despatched?

Answer 9

matching of despatch records with sales invoices

Question 10

control objective relating to sales system

Answer 10

credit notes are only issued for valid reasons

Question 11

control that provides most assurance regarding completeness of revenue figure in FS

Answer 11

use of pre-numbered goods despatched note for every sales transaction and internal checking for completeness of processing

Question 12

risks directly associated with recording in the revenue system

Answer 12

1. sales included in wrong customer accounts

2. credit notes not being properly recorded

Question 12

risks directly associated with recording in the revenue system

Answer 12

1. sales included in wrong customer accounts

2. credit notes not being properly recorded

Question 13

control activities relating to purchases system

Answer 13

1. all orders are authorised by a senior staff member
2. blank order forms kept in a secure location with restricted access
3. order forms are sequentially pre-numbered

Question 14

strength or deficiency?
1. new inventory ordered over phone by company buyer who initiates orders herself and maintains a record of phone orders

2. when goods are subsequently received, the buyer has sole responsibility to check quantity of goods received to the records of phone orders
3. invoices from suppliers are sent to buyer for authorisation, before being forwards to Accounts department for entry in accounting records + payment

Answer 14

1. deficiency
2. deficiency
3. deficiency

Question 15

risk of records of goods received not being kept

Answer 15

goods might be misappropriated for private use

Question 16

risk of payment listing produced by accounting system, only being read by payments clerk

Answer 16

invoices are paid at the wrong time

Question 17

immediate risk of comparisons not made of GRN with purchase notes

Answer 17

unauthorised purchases may be made for personal use

Question 18

immediate risk of supplier terms not being regularly monitored

Answer 18

goods/services not obtained on most advantageous terms

Question 19

immediate risk of pre-numbered GRN not used to record arrival/acceptance of goods

Answer 19

goods/services not being accurately recorded

Question 20

for internal controls over payroll- requiring employees to clock in and out of work helps ensure they’re paid at the correct rate

True or false

Answer 20

false- clocking in and out relates to the correct hours worked being recorded, so it has no bearing on the rate of pay

Question 21

Wages are paid by bank transfer, which is authorised by the financial controller
strength or deficiency?

Answer 21

strength

Question 22

2 controls that will be most effective to ensure payment is made to the right employee

Answer 22

1. BACS list reviewed by chief accountant together with supporting payroll doc
2. print out from the bank is agreed to BACS list and any discrepancies investigated

Question 23

internal control most likely to prevent fictitious employees from being added to payroll

Answer 23

use of hierarchal passwords over standing data files

Question 24

true or false 1. payroll master file should contain details of the employee's cumulative statuary deductions to date 2. reviewing changes to statutory deductions helps to ensure changes to the calculation of gross pay are correctly processed

Answer 24

1. false (monthly payroll is what would have details of cumulative statutory deductions) 2. false (statutory deductions don't affect gross pay)

Question 25

what 2 things would reduce the risk that diff elements of pay might not be correctly recorded in payroll

Answer 25

1. one for one checking of payroll details back to independently maintained personnel records 2. reconciliation of total pay and deduction b/w one pay day and the next