Professional Documents
Culture Documents
11 24 Arens
11 24 Arens
The order clerk placed purchase orders for accessories items; however, it was
discovered that only purchase orders above $3000 required authorization. The order
clerk regularly placed order for personal goods up to value of $3000.
Ans
c) If a proper internal check and verification by an independent person would have been
in place i.e. Control with respect to Independent Check on Perfomance. It could have
prevented such missatement by the clerk as his activities would have been regulated
timely.
2. When goods were received, the warehouse department verified the quantity to the
suppliers despatch note and checked the quality of the goods received. The warehouse
department, however, did not check against the purchase order as no copy of the
purchase order was ever sent to the warehouse department. It was discovered that
three batches of handbags, which the company did not order, were received and
subsequently paidfor.
Ans
a) Here, the control with respect to Adequate Document as Records has been
compramised as vital document such as Purchase Order or its copy is not sent to
Warehouse for verification of rate and quantity ordered and received. Apart from
this Independent check on performance is also missing.
c) If a copy of Purchase order was sent to the Warehouse, the would have verified the
the quantity mentioned in the dispatch note with the Purchase Order and could have
prevented the said misstatment.
3. Purchase invoices were input daily by the purchase ledger clerk. No application
control was ever applied over the input process. It was discovered that several mistakes
were made during the input process and suppliers were paid incorrectly.
Ans
b) The Transaction related Management Assertion that is not met are Accuracy and
Occurance. Accuracy requires that transaction are precisely entered and occurance
required that transaction in accounitng records actually took place. Which in the present
case are missing.
c) A system of proper internal check and seperation of duties would have identified the
error with respect to invoice posting.
4.The finance director is only provided with the total amount of payments to be made on
the payment list for payment approval. It was then discovered that some of the payees
were fictitious suppliers.
Ans.
a) Here, the control with respect to Adequate Document and Records is missing as
relavant supporting documents is not supplied to the Finance Director for approval.
c) If the Proper supporting document like invoice and Purchase Order is also supplied
with the Payment list then the same could have been prevented.
5.The sales ledger clerk was having a long holiday during Christmas times. Upon return
in January, the clerk entered all the unrecorded sales during his leave as January's
sales for convenience sake.
Ans
b) The Transaction related Management Assertion that is not met is Cut Off as Revenue
is moving from one period to another Period.
c) If a Proper Information Proccesing Control of Account Information System in place
could prevent such type of Misstatement
7. When processing orders, the sales clerk entered a discount manually into the invoice.
As the sales clerk was a newly recruited member, it was noted that the employee either
forgot to enter the discount or entered an incorrect level of discount.
Ans
a) Here, the control with respect to Independent Check and Control is Missing. Since
the Sales Clerk is new his work should be cross checked by another experienced
person.
b)The Transaction related Management Assertion that is not met is Accuracy whict
requieres the Transaction to be Precise.
If the proper information processing system would have been in place which could have
performed the calculation of Discount automatically, this error could have been
prevented. If a proper timely internal check and balance is in place then such error can
be detected earlier.