Chapter 14

Question 1

What are control procedures?

Answer 1

Timesheets being approved

Question 2

What are control objectives?

Answer 2

Ensure no fake overtime

Question 3

What are risks?

Answer 3

Overtime is paid but not worked

Question 4

What is tests of control (by auditor)?

Answer 4

pick an e.g., of timesheets to see if they are been signed

Question 5

What is supervision in regards to internal control?

Answer 5

always be someone more senior than the person processing the transaction

Question 6

What is organisation in regards to internal control?

Answer 6

clear roles and responsibilities to make sure that every control gets implemented, and by correct person

Question 7

What is arithmetic and accounting in regards to internal control?

Answer 7

all transactions should be checked for arithmetic accuracy before getting approved

Question 8

What is physical in regards to internal control?

Answer 8

ensuring the security and safe-keeping of the company’s assets

Question 9

What is management in regards to internal control?

Answer 9

controls which allows management to run the business efficiently and effectively

Question 10

What is authorisation in regards to internal control?

Answer 10

no one should be allowed to process a transaction without it being approvedq

Question 11

What is personnel in regards to internal control?

Answer 11

making sure everyone is capable of performing tasks they are assigned to

Question 12

What is segregation of duties in regards to internal control?

Answer 12

Division of responsibilities between more than one person to reduce risk of fraud

Question 13

What is the purchasing system?

Answer 13

works in similar way to revenue system. Stages, risks procedures the same

Question 14

What is the purchasing system order?

Answer 14

Order sent -> goods or services received -> invoice received - > payment of cash

Question 15

When the goods are received what should be raised?

Answer 15

A GRN

Question 16

When the invoice is received what should this be matched with

Answer 16

the GRN note

Question 17

What are the steps of the payroll system?

Answer 17

Hours worked recorded -> payroll liability calculated -> payment to staff

Question 18

What are the steps to the cash system?

Answer 18

Request for payment -> payment authorised - > payment made or receipt -> payment and receipts recorded

Question 19

What does divisions of duties mean?

Answer 19

person signing cheque diff to person authorizing the recording of payment

Question 20

What inventory method should be used and why?

Answer 20

FIFO method reduces the risk of obsolete items

Question 21

What is the purpose of organisational control?

Answer 21

ensures; orderly and efficient conduct, safeguarding of assets, prevention and detection of fraud and error, accuracy and completeness, timely prep of reliable info

Question 22

What are some adv of automated systems?

Answer 22

Quicker, fewer errors, more security, easier to sort and analyse data

Question 23

What are some dis adv of automated systems?

Answer 23

Capital cost, training costs, malicious software, systems could crash