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ACCA Audit and Assurance > 9: Systems > Flashcards

9: Systems Flashcards

1
Q

What are the internal controls systems?

A

The Systems at the Audit client

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2
Q

What kind of risk does understanding the systems help with?

A

Control risk

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3
Q

What 3 things do the auditor need to assess in the systems?

A

1 - System notes
2 - Components
3 - Activities / systems

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4
Q

What are systems notes?

A

The auditor recording the systems the client has in place.

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5
Q

What is the acronym for the components of successful systems?

A

CRIME

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6
Q

What is the acronym for the activities /systems?

A

APIPS

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7
Q

What do they test for when testing a control?

A

Whether it works

not how good it is.

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8
Q

If the controls do not operate as expected then what do we do?

A

Report on the deficiencies

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9
Q

What do we report with when we Report on the deficiencies?

A

Management weakness letter

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10
Q

What do we include in a Management weakness letter

A
  • Weakness
  • Implication
  • Recommendation
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11
Q

What is the purpose and importance of internal controls at the client.

A

These help manage problems that could prevent the organisation from achieving its objectives.

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12
Q

What does a narrative note do?

A

Describes and explains the system

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13
Q

What’s the advantage of narrative notes? 1

A

-Simple to record

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14
Q

What’s the disadvantage of narrative notes?

A

-Too cumbersome if system is complex

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15
Q

What are the two types of questionnaire?

A

Internal control questionnaire

Internal control evaluation questionnaire

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16
Q

What does an Internal control questionnaire do?

A

Assess whether controls exist

which meet specific objectives or prevent or detect errors and omissions.

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17
Q

What does an Internal control evaluation questionnaire do?

A

Lists the objectives, and asks the client how they meet that objective.

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18
Q

What’s the advantage of questionnaires? 4

A
  • Quick to prepare
  • Cost effective
  • All controls are considered
  • Simple to complete
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19
Q

What’s the disadvantage of questionnaires? 2

A
  • Can overstate the controls

- Can be too company specific

20
Q

What is a flow chart?

A

A pictorial of how the system works

21
Q

What’s the advantage of flow charts? 3

A
  • Quick to prepare
  • Easy to follow
  • Eliminate need for details notes
22
Q

What’s the disadvantage of flow charts? 2

A
  • Difficult to prepare unusual transactions in this way.

- Major amendments may require a complete re-draw

23
Q

How do we validate system notes? (Make sure auditor understands the systems)

A
  • Walk through tests
  • Observations
  • Test data (CAAT’S)
24
Q

If the auditor is happy that the controls are working what do they still need to do?

A

Some restricted/reduced substantive testing

25
Q

If the auditor is happy that the controls are working why do they still test?

A

Because no controls are 100% effective

26
Q

What are the five components of good internal controls?

A 
C - Control activities
R-Risk assessment policies/procedures (directors perform)
I-Information systems
M-Monitoring
E-Environment
27
Q

What are the three aspects of the environment?

A

Attitudes
Actions
Awareness of management

28
Q

What are the control activities relevant to the audit? APPIS

A
  • Authorisation
  • Performance review
  • Information processing
  • Physical controls
  • Segregation of duties
28
Q

What do we mean by authorsation?

A

Things like timesheets and anything requiring approval by a manager

29
Q

What do we mean by performance reviews?

A
  • Someone reviewing work

- Compare budget to actual

30
Q

What do we mean by information processing?

A

-Documents and how we capture information

31
Q

What do we mean by Physical controls?

A

Physical access to office

Clear desk policy

32
Q

What do we mean by Segregation of duties

A

Preparer and reviewer

33
Q

Describe application controls

A

Controls over specific application within s system

34
Q

Describe General controls

A

Controls over the computer environment

35
Q

Examples of Application controls

A 
✓ Document counts
✓ Sequence checks
✓ Arithmetic checks
✓ Range checks
✓ Batch reconciliations
36
Q

Examples of general controls

A 
✓ Systems networked
✓ Software update
✓ Software and hardware maintenance
✓ Passwords and restricted access
✓ Backup
37
Q

Describe risk assessment processes

A

How management identifies business risks relevant to the preparation of financial statements

38
Q

Describe Information system

A

The information system relevant to financial reporting objectives

39
Q

Describe monitoring

A

A process to assess the effectiveness of internal control performance over time.

Usually the role of the internal auditor

40
Q

Describe Control environment

A

The governance and management functions (3 A’s)

41
Q

What is the objective of a bank system? 3

A

✓ Cash is safeguarded
✓ Minimal cash held on site
✓ Payments for authorised business
expenditure only

42
Q

What is the objective of a Revenue system? 4

A 
✓ Sales are made to valid customers
✓ Sales are recorded accurately
✓ All sales recorded
✓ Cash collected and allocated on a 
timely manner
43
Q

What is the objective of a Purchases system? 5

A 
✓ Orders are made for a valid purchase
✓ Cost effective
✓ Purchases are recorded accurately
✓ All purchases recorded
✓ Cash paid and allocated on a timely manner
44
Q

What is the objective of a wages system? 4

A

✓ Pay the right people
✓ The right wage rate
✓ Paid for hours worked
✓ Taxes calculated correctly

45
Q

What do we need to know for exam purposes?

A

The difference between

1 - Control objectives
2 - Controls
3 - Tests of controls

ACCA Audit and Assurance (12 decks)

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