Control deficiencies in the financial year reporting process

Question 1

System period-end close

Answer 1

Period-end closing is not performed for PAS which means that transactions
could still be processed within the 15 day period and included in the exported
trial balance, which could result in cut-off errors, resulting in a material
misstatement in the financial statements.

Question 2

PAS does not prevent Mr Dale from exporting trial balances even if all
transactions for the year have not yet been recorded, which could result in
the exported trial balances being incomplete, resulting in a material
misstatement in the financial statements

Answer 2

There is no period-end close procedure checklist which is reviewed / no
overall review of the period-end close process, which could result in the
exported trial balances being incomplete / inaccurate, resulting in a material
misstatement in the financial statements

Question 3

An excel spreadsheet is used to export trial balances from PAS, which could
result in version control / integration errors, resulting in a material
misstatement in the financial statements.

Answer 3

The exported trial balances are not reconciled from the PAS system, which
could result in the exported trial balances sent to AfsPack being inaccurate /
incomplete, resulting in a material misstatement in the financial statements.

Question 4

The exported trial balances are not read-only password protected, which
could result in AfsPack being able to edit the trial balances before uploading
into the RS system, resulting in a material misstatement in the financial
statements.

Answer 4

There is no back up of the exported trial balances by Mr Dale before it is sent
to AfsPack, which could result in a loss of data.

Question 5

The exported trial balances are not encrypted / sent using e-mail / not sent
over a secure line to AfsPack, which could result in the trial balances being
susceptible to unauthorised access and changes, resulting in a material
misstatement in the financial statements.

Answer 5

There is no reconciliation from the PAS system to the RS system / no data
integrity checks are performed after the upload was performed by AfsPack,
which could result in incomplete / inaccurate trial balances in the RS system,
resulting in a material misstatement in the financial statements

Question 6

There is no review of the classification of trial balance accounts provided to
AfsPack by Mr Dale, which could result in the incorrect classification of an
account, resulting in incorrect presentation in the financial statements.

Answer 6

There is no review of the schedule of intercompany accounts prepared by Mr
Dale and provided to AfsPack, which could result in the schedule being
incomplete / incorrect, resulting in a material misstatement in the financial
statements

Question 7

There is no review of the intercompany eliminations performed by AfsPack,
which could result in the incomplete / incorrect elimination of intercompany
accounts, resulting in a material misstatement of the financial statements

Answer 7

There are inadequate controls in place regarding the editing of trial balances
as AfsPack is able to edit the second trial balance, which could result in
unauthorised changes to the second trial balance, resulting in a material
misstatement in the financial statements

Question 8

There is a lack of segregation of duties. Mr Dale has too many responsibilities
and can change the financial reports without review, which could result in
fraudulent financial reporting.

Answer 8

Mr Dale processes manual consolidation journal entries, which could result
in the consolidation journal entries being incomplete / inaccurate, resulting in
a material misstatement in the financial statements

Question 9

There is no review of the accuracy, validity and completeness of
intercompany adjustments, which means that intercompany adjustments
may be incomplete and inaccurate

Answer 9

The consolidation trial balance is accessed by Mr Dale online, with no
indication of usernames and passwords being in place, which could result in
unauthorised access and changes to the consolidation trial balance, resulting
in a material misstatement in the financial statements.

Question 10

There is no review of the consolidation worksheet / consolidation journal
entries prepared by Mr Dale, which could result in the consolidation
adjustments being incomplete / inaccurate / invalid, resulting in a material
misstatement in the financial statements

Answer 10

There is no comparison between the information in the consolidation
worksheet and source documents, which could result in Mr Dale processing
invalid consolidation journal entries, resulting in a material misstatement in
the financial statements.

Question 11

There is no reconciliation of the original trial balance and the final trial
balance after processing of adjustments, which could result in the final trial
balance being incomplete / inaccurate, resulting in a material misstatement
in the financial statements

Answer 11

The trial balance from i-Seva is not agreed to the equity accounting
spreadsheet, which could result in the incorrect trial balance being used,
resulting in a material misstatement in the financial statements

Question 12

There is no review of the manual equity accounting spreadsheet / equity
accounting journals prepared by Mr Dale, which could result in the equity
accounting being incomplete / inaccurate / invalid, resulting in a material
misstatement in the financial statements.

Answer 12

The consolidated annual financial statements are prepared using a standard
template, which may not accommodate unique transactions and events,
resulting in a material misstatement in the financial statements.

Question 13

The associate note is generated automatically, which could result in
inaccurate disclosure / boilerplate disclosure / disclosure that is not useful to
the users of the financial statements.

Answer 13

There is no review of the financial statements, including adequacy of
disclosures, which could result in the annual financial statements not being
fairly presented.