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Internal Controls and Substantive Testing
You are the auditor of PC Ltd., a company that produces low cost electronic goods to children and young adults. The audit has a year end of 30th June 2012.
There are four main people involved with the acquisitions of inventory for PC Ltd. Ms Auburn is the purchases officer; Mr Brown is the Accounts Payable Clerk; Mr Crimson is the Financial Controller and Ms Dark is the Payments Officer.
The acquisitions system works as follows:
Required:
a) Identify three controls that operate within this system and state the potential errors they are aimed at preventing.
b) Describe two additional controls (or improvements to controls) that you would implement into this system and why.
c) Describe the substantive tests that you would perform on transactions in the acquisitions cycle of this system to gain adequate assurance over the assertions of completeness, cut off and accuracy.
Public accounting firms are sometimes grouped into categories of local firms, regional firms, national firms, and international firms. Explain briefly the characteristics of each. Include in your answer the types of services stressed in each group.
The internal controls in the system that are potentially effective, the risk that the control could mitigate and one ‘test of control' for each of the identified potentially effective controls.
You will then be required to audit cases available on FLECS Blackboard or 20 hospital records.
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Discuss the ethical issues involved with this situation. Explain how you should handle this situation. Explain what type of report you should issue and why.
Why is there greater risk for an individual accounting worker than there was before? Why is the primary objective of an audit is to add credibility to management's financial statements?
Discuss the economy, financial markets and the means they currently use to attract direct foreign investment. Conduct an analysis of what they are doing right/wrong in their financial markets and whether you recommend investment there should conclu..
Assignment: Read the following case and explain one internal control procedure that would be helpful in this scenario.
Internal control has gained increasing importance among management, external auditors, regulators, and others. Use a specific example that illustrates the answer.
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