Internal Control Section B (Direct control and tests of control) Flashcards
1
Q
Direct control for factory staff issued with swipe to enter and exist factory that’s monitored by security?
A
Ensures only genuine employees are only paid for work actually done. Stops fradulent activity
2
Q
Tests of control for factory staff issued with swipe to enter and exist factory that’s monitored by security?
A
Observe use of clock cards by employees and confirm security staff are supervising the process
3
Q
Direct control for payroll supervisor selects sample of payslips, recalculates gross to net pay calculations and compares to output from payroll system?
A
Reduces risk of automated system generating errors during payroll processing
4
Q
Tests of control for payroll supervisor selects sample of payslips, recalculates gross to net pay calculations and compares to output from payroll system?
A
Review weekly payslips sampled by payroll supervisors for evidence of a signature to confirm calculations have been reviewed
5
Q
Direct control for revised pay rates for factory are inputted by clerk into payroll system then checked by a senior clerk?
A
Reduces risk of input errors resulting in overpayment or underpayment
6
Q
Tests of control for revised pay rates for factory are inputted by clerk into payroll system then checked by a senior clerk?
A
Obtain payroll listing for factory staff used for pay rate increase and review for evidence of signature for senior clerk
7
Q
Direct control for pay packets paid by two members of stafff with one checking payslips and another one generating them?
A
Segragation of duties and reduces likelihood of errors or fraud by increasing pay packets
8
Q
Tests of control for pay packets paid by two members of stafff with one checking payslips and another one generating them?
A
inspect the weekly payroll listing for evidence of signature by two members of staff involved in the preparation of the pay packets
9
Q
Tests of control for when no checks are performed on an automated key card system?
A
Review sample of weeks transferred from key card system for evidence for evidence they’ve been checked by senior official
10
Q
Tests of control for when payroll clerk can edit payroll data without this being reviewed?
A
Sample of weekly edit reports, confirm these have been signed and reviewed by senior official
11
Q
Tests of controls for when non-current register is not being physically verified on a frequent basis?
A
Review board minutes for evidence of new policy set by board regarding frequency of internal audit visits
12
Q
Tests of control for when financial policy is adjusted so items only capitalised if they exceed £20000 (a significant change)
A
Review board minutes for evidence changes to accounting policies have been approved
13
Q
Tests of control for finance director authorises monthly supplier payments but only views total amount of payments to be made?
A
Sample of payment listings should be reviewed to verify finance director has agreed amounts payable to supporting documentation
14
Q
Tests of control for when there are no petty cash receipts?
A
Sample of petty cash transactions should be reviewed to ensure receipts have been provided for expenses
15
Q
Tests of control for when bank reconciliations are done on a quarterly basis?
A
Review sample of bank reconciliation statements to ensure they have been completed and reviewed on a timely basis
16
Q
Direct control for new sales system fully tested prior to implementation
A
Reduces risk of data being lost or not processed correctly if there are issued associated with operation of new system
17
Q
Tests of control for new sales system fully tested prior to implementation
A
Audit team should review procedures and documentation relating to testing which has been udnertaken are appropriate
18
Q
Direct control for when customers undergo a credit check?
A
Requiring a credit check reduces risk of lost revenue and uncollectable trade receivables
19
Q
Tests of control for when customers undergo a credit check?
A
Select sample of new customer accounts opened in period and confirm that a credit check has been performed
20
Q
Direct control for when receivables ledger performs a monthly review and identifies aged more than 30 days?
A
Credit control should ensure debts are collected on a timely basis reduces risk of irrecoverable debts
21
Q
Tests of control for when receivables ledger performs a monthly review and identifies aged more than 30 days?
A
Obtain a copy of aged receivables report and confirm evidence of review
22
Q
Direct control for when accounts clerk performs monthly trade receivables account reconciliation and resolves error on a timely basis
A
Regular reconciliation of trade receivables account helps ensure receivables balance in FS is presented accurately
23
Q
Tests of control for when accounts clerk performs monthly trade receivables account reconciliation and resolves error on a timely basis
A
Audit team should review trade receivables reconciliations and confirm these are performed on a monthly basis
24
Q
Direct control for sequence checks on a sequentially numbered key card carried out by HR supervisor?
A
Ensure payroll records are completem employees are paid for hours worked and all hours are recorded
25
Tests of controls for sequence checks on a sequentially numbered key card carried out by HR supervisor?
For sample of key cards recorded in clocking-in system, carry out sequence check to identify if there are any gaps in the sequence
26
Direct control for payroll clerk recalculating gross and net pay for the number of hours?
Reduces errors in the automated transfer during payroll processing
27
Tests of control for payroll clerk recalculating gross and net pay for the number of hours?
Review calculations that have been performed. Confirm with supervisor through evidence of signature, enquire about any anomalies
28
Direct control for password updated monthly using a random password generator?
Reduces risk of unauthorised access to sensitive information (e.g. payroll information)
29
Test of control for password updated monthly using a random password generator?
Attempt to login to payroll system using out-of-date password. Confirm system rejected access
30
Direct control for tax liability calculation by payroll who then passes it to FC for review?
Creates segragation of duties between payroll supervisor calculating liability and financial controller reviewing calculation
31
Test of control for tax liability calculation by payroll who then passes it to FC for review?
Review sample of calculations of monthly tax liabiltiy for evidence of review by FC
32
Direct control for when unique employee numbers are assigned to each employee by HR?
Reduces the risk of ficticious employees being set up by payroll
33
Tests of control for when unique employee numbers are assigned to each employee by HR?
Attempt to add new joiner to system without unique employee numbers, should reject this addition
34
Direct control for review of exception report of changes to payroll standing data?
Ensures unauthorised amendments to standing data are identified and investigated on a timely basis
35
Tests of control for review of exception report of changes to payroll standing data?
Select a sample of monthly exception reports and review for evidence of review, following up on any unexpected changes by payroll manager
36
Direct control for purchases orders up to £5000 are authorised by manager?
Ensures goods are only purchased which are business related
37
Tests of control for purchases orders up to £5000 are authorised by manager?
Select sample of purchase orders and review for evidence of authorisation within limits. Agree appropriate signature on approved signatures list
38
Direct control for goods received notes are received and checked?
Ensures company is not paying for goods it did not order
39
Tests of control for goods received notes are received and checked?
Review a sample of GRNs held in the warehouse department for signature, as evidence of checks being undertaken on receipt of goods
40
Direct control for purchases invoices logged with control totals?
Control totals ensure both completeness and accuracy over input of purchase invoices
41
Tests of control for purchases invoices logged with control totals?
Select sample of control total sheets and review evidence of control totals being utilised by clerk's signature
42
Direct control for finance director authorisation of bank transfer list and reviewing duplicate payments?
Reduces risk suppliers are paid the incorrect amount
43
Tests of control for finance director authorisation of bank transfer list and reviewing duplicate payments?
Review payments list for evidence of review by finance director
44
Direct controls for asset classification checks?
Use of department guidelines by finance director should reduce risk of understated/overstated profits and incorrect depreciation charges
45
Test of controls for asset classification checks?
Select sample of asset expenditure purchase orders and review evidence of classification being noted
46
Direct controls for automated bnak reconciliation that's reviewed by FC?
Monthly review and investigation ensures frauds and erriors are identified on a timely basis
47
Test of controls for automated bnak reconciliation that's reviewed by FC?
Review file of bank reconciliations to confirm a bank rec is included for each month and it has been reviewed by FC
48
Test of controls for segragation of employee who does bank recs and also posts bank receipts and list of individual customers?
Review file of completed bank reconciliations to identify who prepared them
49
Test of controls for when there are insufficient copies of GRN?
Review file of copy GRNs held by purchase ordering department and review evidence that GRNs are matched to orders
50
Test of controls for when purchase ledger clerk only uses count controls for inputting invoices into purchases system?
The audit team should utilise test data procedures to assess whether data can be entered without the use of batch control totals
51
Test of controls for when inventory using out-of-date standard costs?
Obtain copy of standard costs used in inventory valuation, assess when review was last undertaken
52
Test of controls for when overtime is not authorised?
Review overtime report for evidence of authorisation and ensure it was undertaken prior to payment of overtime
53
Test of controls for when bank transfer is authorised?
Obtain a sample of payments lists and review for signature by fiannce director as evidence control is operating correctly
54
Direct control for clock card information identifies employee number and links into hours worked report
Hours worked are automatically transferred into pauroll system, reduces risk of input errors for entering hours
55
Tests of control for clock card information identifies employee number and links into hours worked report
Utilise test data procedures to input dummy clock card information, verify this is updated into payroll system
56
Direct control for cash is received weekly from bank by a security company?
Important cash is adequately safeguarded to reduce risk of misappropriation
57
Tests of control for cash is received weekly from bank by a security company?
Enquire payroll clerks how cash is delivered for weekly pay packets
58
Tests of control for when there are no inter-branch transfers?
Enquire with store manager the process for ordering of inventory items, in particular if it is possible to order from other brances
59
Tests of control for when GRNs aren't sent to accounts department frequently?
Enquire accounts clerk as it frequency of when GRNs are received to assess if being sent properly
60
Tests of control for when GRN is only sent to accounts department?
Review GRNs held by purchase ordering clerk and review evidence these are matched to orders and flagged as completed
61
Tests of control for supplier statement reconciliation?
Review reconciliations ensure they are being performed on a regular basis and these are reviewed by responsible official
62
Direct control for when sales invoices are prepared using an approved company price list?
Reduces risk of errors when raising invoices and ensuring accuracy of revenue
63
Tests of control for when sales invoices are prepared using an approved company price list?
Obtain copy of current price list and for a sample of invoices, agree that correct prices have been used
64
Direct control for when discounts must be requested by a sales manager and authorised by sales director?
Reduces risk of fraud which will result in misstatement of revenue
65
Tests of control for when discounts must be requested by a sales manager and authorised by sales director?
Attempt to process an invoice with sales discount not authorised by director. System should reject this
66
Direct control for when invoice is marked as paid and filed separately from invoices not yet paid?
Prevents invoices from being paid twice resulting in unnecessary cash outflow
67
Tests of control for when invoice is marked as paid and filed separately from invoices not yet paid?
Inspect file of paid invoices and ensure kept separate from invoices not yet paid
68
Direct control for when tills are closed and daily sales reading are reconciled to total of cash in tills?
Daily cashing up procedures reduces risk of misstatement within cash balance
69
Tests of control for when tills are closed and daily sales reading are reconciled to total of cash in tills?
Auditor should review file of daily reconciliations to ascertain if end of day reconciliations have taken place
70
Direct control for when cash collected by customer is taken to bank via collection by a security company?
Ensures cash is safeguarded and risk of theft when transferring to bank is minimised
71
Tests of control for when cash collected by customer is taken to bank via collection by a security company?
Enquire staff how cash is transferred to bank. Sample of invoices from collection company should be reviewed and confirmed that charges made for daily collections
72
Direct control for when checks on amounts banked and credit card receipts are credited to bank statements
Ensure completeness of cash receipts as they are transferred between security company and credit card company
73
Tests of control for when checks on amounts banked and credit card receipts are credited to bank statements
Review daily reconciliations clerk has completed to confirm process is undertaken as described
74
Tests of control for when clock in/out process not supervised
Enquire of the supervisor whether they perform a random check of employees.
75
Tests of control for when cemployee breaks not monitored
Review rota break time formally communicated
76
Tests of control for temporary staff appointed by factory supervisors?
Inspect HR procedures manual to ensure appointments of staff are responsible of HR department
77
Tests of control for overtime authorised after payment made
Inspect overtime reports for evidence of a responsible individual;s signature authorising overtime prior to payment being processed
78
Tests of control for production supervisors determine bonuses?
Inspect communication of bonuses to payroll department and ensure its sent by senior official
79
Tests of control for no input checks on bonuses?
Enter dummy data into the system to try and by pass the checks, system should reject this
80
Tests of control for payroll manager reviewing bank transfer and amending payroll records?
Inspect payroll bank transfer listing for authoriastion signature. Ensure signature is person outside payroll department
81
Tests of control for payroll calciulations not checked?
Review a sample of gross to net pay calculations for evidence they are undertaken
82
Tests of control for changes to standing data?
Ask clerk to attempt to make changes to payroll standing data, system should reject this
83
Tests of control for authorisation of overtime?
Review sample of employee weekly overtime sheets for evidence of signature by department head
84
Tests of control for no checks on time off taken?
Select sample of overtime sheets with time taken off and confirm evidence of check by payroll clerk
85
Tests of control for review of overtime?
Sample of overtime reports emailed to department heads confirm if response received from each head by reviewing all responses
86
Tests of control for payments list not checked
Obtain sample of payments list and review signature by finance director as evidence control is operating correctly
87
Direct control for website has controls to check validity of data entered by customer
Reduces risk of orders being processed incorrectly. Ensures sales accuracy
88
Tests of control for wensite has controls to check validity of data entered by customer
Input sales order into website with various incorrect details to check system rejects order
89
Direct control for invoices raised from GDN. Ensures actual quantity and type of goods despatched rather than order may be different?
Reduces risk of customers being invoice incorrectly goods not received which will result in misstatement of revenue
90
Tests of control for invoices raised from GDN. Ensures actual quantity and type of goods despatched rather than order may be different?
For sample of invoices, agree quantity and type of goods to GDN. Inspect GDN for evidfence of being matched to invoices
91
Direct control for regular customer statements and follow up on overdue debts
Risk of irrecoverable debt is reduced
92
Tests of control for regular customer statements and follow up on overdue debts
For a sample of customers inspect copies of monthly statements to confirm they are actually sent to customers and review evidence of phone calls on overdue debts
93
Direct control for inventory levels checked on a regular basis to purchase of raw materials?
Reduces risk of inappropriate levels of stock being maintained, causing overstatement if not valued appropriately at lower of cost and NRV
94
Tests control control for inventory levels checked on a regular basis to purchase of raw materials?
Observe weekly stock check process is being performed by the factorry supervisors
95
Direct control for when requisitions are authorised by factory managers before being sent to procurement department
Ensures only necessary goods and services are procured
96
Tests of controls for when requisitions are authorised by factory managers before being sent to procurement department
Inspect a sample of requisitions for evidence of authorisation
97
Direct control for when approved supplier list
Gives assurance about the quality of goods and reliability of suppliers
98
Direct control for pre-printed forms are completed by HR for all new employees, and includes assignment of a unique employee number, and once verified, a copy is sent to the payroll department.
The use of pre-printed forms ensures that all relevant information (e.g. tax IDs) is obtained about employees before set up. Minimises the risk of incorrect wage and tax payments
99
Tests of control for pre-printed forms are completed by HR for all new employees, and includes assignment of a unique employee number, and once verified, a copy is sent to the payroll department.
Select a sample of new employees added to the payroll during the year; review the joiner forms for evidence of completion of all parts and that the information was verified as accurate
100
Direct control for on a quarterly basis, exception reports of changes to payroll standing data are produced and reviewed by the payroll director?
This should ensure that any unauthorised amendments to standing data are identified and resolved on a timely basis.
101
Tests of control for on a quarterly basis, exception reports of changes to payroll standing data are produced and reviewed by the payroll director?
Select a sample of quarterly exception reports and review for evidence of review and follow up of any unexpected changes by the payroll director
102
Direct control for production employees paid in cash, cash is received weekly from the bank by a security company?
Likely the sum of money required to pay over 175 employees would be considerable
103
Tests of control for production employees paid in cash, cash is received weekly from the bank by a security company?
Review a sample of invoices from the security company to Raspberry Co for delivery of cash
104
Direct control for the status of a purchase order is marked as “complete” when goods received are accepted?
This reduces the risk that Swift Co could pay for goods that have not been received
105
Tests of control for the status of a purchase order is marked as “complete” when goods received are accepted?
Review a sample of GRNs and confirm that the status of the corresponding order has been flagged as “complete”
106
Direct control for purchase invoices are logged into the detailed purchases listing in batches, using control totals?
Control totals ensure both completeness and accuracy over the input of purchase invoices
107
Tests of control for purchase invoices are logged into the detailed purchases listing in batches, using control totals?
Select a sample of control total sheets and review for evidence of control totals and the clerk’s signature.
108
Direct control for factory staff are issued with clock cards which they are required to swipe to enter and exit the factory and this process is supervised by security staff
This ensures that genuine employees are only paid for the work actually done and reduces the risk of employees being paid but not completing their required hours.
109
Test of control for factory staff are issued with clock cards which they are required to swipe to enter and exit the factory and this process is supervised by security staff
Observe the use of clock cards by employees when entering and exiting the factory and confirm that security staff are supervising the process.
110
Control risk for the finance director authorises the monthly supplier payments listing, but only views the total amount of payments to be made?
When looking at payment list, there is a risk that suppliers are being paid the incorrect amount
111
Control recommendation for the finance director authorises the monthly supplier payments listing, but only views the total amount of payments to be made?
Finance director should review payment list prior to authorisation
112
Tests of control for the finance director authorises the monthly supplier payments listing, but only views the total amount of payments to be made?
Sample of payment listings should be reviewed to verify that the finance director has agreed the amounts payable to supporting documentation prior to the bank transfer being made
113
Control risk for the company maintains four bank accounts but only the main current account is reconciled on a monthly basis, with the other three bank accounts being reconciled quarterly?
If all accounts are not reconciled on a monthly basis, errors or fraud may not be spotted on a timely basis
114
Control recommendation for the company maintains four bank accounts but only the main current account is reconciled on a monthly basis, with the other three bank accounts being reconciled quarterly?
All bank accounts should be reconciled each month and any reconciling items on the bank reconciliation statements should be investigated and corrected
115
Tests of control for the company maintains four bank accounts but only the main current account is reconciled on a monthly basis, with the other three bank accounts being reconciled quarterly?
Review a sample of bank reconciliation statements for all bank accounts to ensure they are being completed and reviewed on monthly basis.
116
Direct control for the receivables ledger clerk performs a monthly review of the aged receivables listing and identifies those aged more than 30 days which are followed up with the relevant customers by the credit control department?
The regular review of the aged receivables listing and subsequent action by credit control should ensure that debts are collected on a timely basis which reduces the risk of irrecoverable debts
117
Tests of control for the receivables ledger clerk performs a monthly review of the aged receivables listing and identifies those aged more than 30 days which are followed up with the relevant customers by the credit control department?
Obtain a copy of the aged receivables report downloaded and confirm there is evidence of review, such as a signature or electronic sign‐off, by the receivables ledger clerk
118
Direct control for the accounts clerk performs a monthly trade receivables account reconcilia tion and resolves errors on a timely basis. The reconciliation is reviewed and approved by the financial controller?
Regular reconciliation of the list of individual customer balances and the trade receivables account helps to ensure that the receivables balance presented in the financial statements is accurate
119
Tests of control for the accounts clerk performs a monthly trade receivables account reconciliation and resolves errors on a timely basis. The reconciliation is reviewed and approved by the financial controller?
For a sample of reconciliations with reconciling items trace to supporting documentation to confirm that errors have been corrected.
120
Direct control for the clocking‐in process is monitored by a camera on entry to the distribution centre and video footage is reviewed by HR every week?
This will prevent staff members fraudulently clocking‐in for other employees and hence employees will only be paid for actual hours worked ensuring occurrence of payroll
121
Tests of control for the clocking‐in process is monitored by a camera on entry to the distribution centre and video footage is reviewed by HR every week?
For a sample of weeks, review the log of the recordings to identify who reviewed that week’s footage to ensure it has been reviewed by a member of the HR department
122
Direct controls for payroll clerk confirms the transfer of hours and calculations has been done accurately by recalculating, for a sample of employees, their gross to net pay
This reduces the risk that errors occur in the automated transfer and calculations during the payroll processing.
123
Tests of controls for payroll clerk confirms the transfer of hours and calculations has been done accurately by recalculating, for a sample of employees, their gross to net pay
For a sample of months, review the calculations of gross to net pay for evidence that the calculations have been performed. Confirm the signature of the payroll supervisor as evidence that they have reviewed the report.
124
Direct control for each month, the finance director carries out a payroll account reconciliation and investigates any differences
This will ensure the payroll expense and employment tax liability is accurate and is not misstated in the year‐end financial statements.
125
Tests of control for each month, the finance director carries out a payroll account reconciliation and investigates any differences
Reperform a sample of account reconciliations and compare results with those prepared by the finance director. Discuss any discrepancies with the finance director
126
Direct control for a separate human resources (HR) department, which is responsible for setting up all new employees
Having a segregation of roles between HR and payroll departments reduces the risk of fictitious employees being set up and also being paid
127
Tests of control for a separate human resources (HR) department, which is responsible for setting up all new employees
Review the job descriptions of payroll and HR to confirm the split of responsibilities with regards to setting up new joiners
128
Direct control for on a monthly basis an exception report of changes to payroll standing data is produced and reviewed by the payroll manager
This ensures that any unauthorised amendments to standing data are identified and investigated on a timely basis so that the data used when the payroll is run is valid and accurate.
129
Tests of control for on a monthly basis an exception report of changes to payroll standing data is produced and reviewed by the payroll manager
Select a sample of monthly exception reports and review for evidence of review and follow up of any unexpected changes by the payroll manager
130
Direct control for warehouse department agrees the receipt of goods from suppliers to a copy of the purchase order
This ensures that Swift Co is not recording liabilities and subsequently paying for the receipt of inferior quality goods or for goods it did not order
131
Tests of control for warehouse department agrees the receipt of goods from suppliers to a copy of the purchase order
Review a sample of GRNs held in the warehouse department for signature, as evidence of checks being undertaken on receipt of goods.
132
Direct control for a pre‐printed forms are completed by HR for new employees, and includes assignment of a unique employee number, and once verified a copy is sent to the payroll department?
Reduces the risk of fictitious employees being set up by payroll which would result in overstatement of payroll costs
133
Tests of control for a pre‐printed forms are completed by HR for new employees, and includes assignment of a unique employee number, and once verified a copy is sent to the payroll department?
Attempt to add a new joiner to the payroll system without a unique employee number, the system should reject this addition.
134
Direct control for cashier reconciles the bank statements to the bank ledger account monthly and this reconciliation is reviewed and investigated by the financial controller
Monthly review and investigation ensure that fraud and errors are identified on a timely basis, reducing the risk of misstatement of the bank and cash balance.
135
Tests of control for cashier reconciles the bank statements to the bank ledger account monthly and this reconciliation is reviewed and investigated by the financial controller
For a sample of months reperform the bank reconciliation and where differences have occurred discuss and investigate these with the financial controller.
136
Control risk if customer credit limits are set by sales ledger clerk?
Sales eldgers are not sufficiently senior
137
Control recommendation if customer credit limits are set by sales ledger clerk?
Credit limits should be set by senior official in the sales department and not by sales ledger clerk
138
Tests of control if customer credit limits are set by sales ledger clerk?
For a sample of new customers accepted in the year, review the authorisation of the credit limit, and ensure that this was performed by a responsible officia
139
Control risk if customer orders are given a number based on the sales person's own identification number
Without sequential numbers, it is difficult for company to identify missing orders
140
Control recommendation if customer orders are given a number based on the sales person's own identification number
Sales orders should be sequentially numbered. On a regular basis, a sequence check of orders should be undertaken to identify any missing orders
141
Tests of control if customer orders are given a number based on the sales person's own identification number
Reperform the control by undertaking a sequence check of sales orders. Discuss any gaps in the sequence with sales ordering staff.
142
Control risk if overtime is not authorised prior to being paid?
The information per employee is collated and submitted to payroll by a production clerk, but not authorised. The production director is only informed about overtime levels via quarterly reports.
143
Control recommendation if overtime is not authorised prior to being paid?
All overtime should be authorised by a responsible official prior to the payment being processed by the payroll department.
144
Tests of controls if overtime is not authorised prior to being paid?
Review the overtime report for evidence of authorisation and note the date this occurred to ensure that this was undertaken prior to the payment of the overtime.
145
Direct control if the quarterly production bonus is input by a clerk into the payroll system, each entry is checked by a senior clerk for input error s prior to processing
This reduces the risk of input errors resulting in misstatement of payroll costs and over/underpayment of the bonus to employees
146
Tests of control if the quarterly production bonus is input by a clerk into the payroll system, each entry is checked by a senior clerk for input error s prior to processing
In addition, obtain listings of quarterly bonus payments and review for evidence of signature by the senior clerk who checks for input errors.
147
Direct control if production employees are issued with clock cards and are required to swipe their cards at the beginning and end of their shift
This ensures that genuine employees are only paid for the work actually done, and reduces the risk of employees being paid but not completing their eight‐hour shift.
148
Tests of control if production employees are issued with clock cards and are required to swipe their cards at the beginning and end of their shift
Confirm the security team is supervising the process and following up on discrepancies through discussions with the security staff.
149
Control risk if GRNs are not processed regularly?
This could result in delays in suppliers being paid as the purchase invoices could not be agreed to a GRN and also recorded liabilities being understated
150
Control recommendation if GRNs are not processed regularly?
A copy of the GRNs should be sent to the accounts department on a more regular basis, such as daily
151
Tests of control if GRNs are not processed regularly?
Enquire of the accounts clerk as to the frequency of when GRNs are received to assess if they are being sent promptly.
152
Direct control for credit checks and credit limits set and reviewed regularly?
All new customers are required to undergo a full credit check and credit limits are set with appropriate authorisation by the sales director.
153
Tests of control for credit checks and credit limits set and reviewed regularly?
Inspect a sample of customer files to ensure a credit check has been obtained and review the date it was performed to ensure it is up to date
154
Direct control if discounts must be requested by a sales manager and authorised by the sales director?
Reduces the risk of fraud which will result in misstatement of revenue
155
Tests of control if discounts must be requested by a sales manager and authorised by the sales director?
Attempt to process an invocie with a sales discount that has not been authorised by the sales director. System should reject invoice
156
Direct control if payments are made by the cashier's office and recorded by the purchase ledger team?
This segregation of duties prevents fraud and error as one person is not responsible for the physical cash and updating the ledger which would enable someone to conceal the fraud
157
Test of control if payments are made by the cashier's office and recorded by the purchase ledger team?
Inspect the accounts team organisational chart to ensure appropriate segregation of duties between the cashier’s office and purchase ledger team.
158
Direct control if invoices are stamped as "paid" and filed separately from invoices not yet paid?
Prevents invoices from being paid twice, prevents unnecessary cash outflow
159
Tests of control if invoices are stamped as "paid" and filed separately from invoices not yet paid?
Inspect the file of paid invoices and ensure they are kept separate from invoices not yet paid. Inspect them for evidence they have been stamped as ‘Paid’
160
Direct control if the daily sales readings from the tills along with the cash and credit card data are transferred to head office through a daily interface into the sales and cash receipts records?
Should ensure sales and cash records are updated on a prompt basis and are complete and accurate
161
Tests of control if the daily sales readings from the tills along with the cash and credit card data are transferred to head office through a daily interface into the sales and cash receipts records?
Review the date on which the sales and cash receipt records were updated to ensure this occurred promptly
162
Control deficiency if employees are entitled to a 30‐minute paid break and do not need to clock out to access the dining area.
Employees could be taking excessive breaks, leading to decreased productivity
163
Control recommendation if employees are entitled to a 30‐minute paid break and do not need to clock out to access the dining area.
Employees should be allocated set break times and there should be a supervisor present to ensure that employees only take the breaks they are entitled to.
164
Tests of control if employees are entitled to a 30‐minute paid break and do not need to clock out to access the dining area.
Review the rota for break‐times to ensure break times are formally communicated to staff
165
Control risk if temporary staff appointed by factory supervisors?
The supervisor could appoint unsuitable employees and may not carry out all the required procedures for new joiners.
166
Control recommendation if temporary staff appointed by factory supervisors?
All appointment of staff, whether temporary or permanent, should only be made by the human resources department.
167
Tests of control if temporary staff appointed by factory supervisors?
Inspect the HR procedures manual to ensure that appointments of staff are the responsibility of the HR department
168
Control risk if production supervisors determine bonuses
Production supervisors are not senior enoguh to determine bonuses
169
Control recommendation if production supervisors determine bonuses
The bonus should be determined by a more senior individual, such as the production director, and this should be communicated in writing to the payroll department
170
Tests of control if production supervisors determine bonuses
Inspect the communication of bonuses to the payroll department and ensure it is sent by a senior official.
171
Control risk if no identity checks on cash payments
Even if most employees are known to the clerk, there is a risk that without identity checks wages could be pai d to incorrect employees
172
Control recommendation if no identity checks on cash payments
The payroll clerks should be informed that all cash wages can only be paid upon sight of the employee’s clock card and photographic identification as this confirms proof of identity
173
Tests of control if no identity checks on cash payments
Observe the process of wage collection to ensure that employees can only collect their wages on production of their clock card and photographic ID.
174
Direct control if website has controls to check the validity of the data entered by the customer
This reduces the risk of orders being processed incorrectly, goods not being delivered to the correct location and card payments not being received.
175
Tests of control if website has controls to check the validity of the data entered by the customer
Input a sales order into the website with various incorrect details to check that the system would reject the order
176
Direct control if sales invoices are raised from GDN?
This ensures the invoice relates to the actual quantity and type of goods despatched rather than the order which may be different
177
Tests of control if sales invoices are raised from GDN?
Inspect the GDN for evidence of being matched to invoices to ensure the control has been performed.
178
Direct control if regular customer statements and follow up of overdue debts
Reminds customers of the invoices they need to pay and also means they can check if there are any errors in the invoices. Risk of irrecoverable debts is reduced
179
Tests of control if regular customer statements and follow up of overdue debts
For a sample of customers, inspect copies of the monthly statements to confirm that they are actually sent out
180
Control deficiency for the internal audit (IA) department undertakes physical verification of assets each year, and it takes over ten years to physically verify all 21 sites
If the non‐current asset register is not physically verified on a regular basis, there is an increased risk of assets being misappropriated as there is no check that the assets still exist in their correct location
181
Control recommendation for the internal audit (IA) department undertakes physical verification of assets each year, and it takes over ten years to physically verify all 21 sites
During visits, any assets which cannot be located should be investigated fully to identify where they could be. If they cannot be located, then they should be written off
182
Tests of control for the internal audit (IA) department undertakes physical verification of assets each year, and it takes over ten years to physically verify all 21 sites
Review records from physical verification visits by IA to ensure comparisons have been performed
183
Control deficiency for holiday requests not always authorised?
This could result in employees taking unauthorised leave, resulting in production difficulties if an insufficient number of employees are present to operate the power plant.
184
Control recommendation for holiday requests not always authorised?
Payroll clerks should not process holiday payments without agreement to the authorised holiday form
185
Control deficiency is when company values iots inventory using standard costs, whicha re kept up-to-date?
If standard costs reviewed a long time ago, risk costs are misstated since changes in raw materials may not have been accounted for
186
Control recommendation when company values iots inventory using standard costs, whicha re kept up-to-date?
Review of all standard costs should be undertaken bu a senior manager in production costs to determine if any adjustments need to be made
187
Tests of control when company values iots inventory using standard costs, whicha re kept up-to-date?
Obtain copy of the standard costs used for inventory valuation, assess when review was last undertaken and inspect evidence of review by production director
188
Direct control if warehouse department agrees the receipt of goods from supplier to a copy of the purchase orders abd confirms quantity/quality of goods and signs GRNs to evidence checks
Not recording liabilities which are related to paying for goods of an inferior quality
189
Tests of control if warehouse department agrees the receipt of goods from supplier to a copy of the purchase orders abd confirms quantity/quality of goods and signs GRNs to evidence checks
Review sample GRNs held in the warehouse department for signature, as evidence of checks being undertaken on receipt of goods
190
Direct control for new sales system was fully tested prior to its implementation and the new and old systems are being run in parallel until year-end
Reduces risk data is list or not processed correctly if there are issues associated with operation of the new system
191
Tests of control for new sales system was fully tested prior to its implementation and the new and old systems are being run in parallel until year-end
Review procedures and documentation relating to the testing which has been undertaken and errors have been resolved
192
Tests of control for no inter branch transfers?
Inspect a sample of completed inter branch inventory forms for confirmation control is operating
