Note That There Is Not Much Info On This Topic Due To Time Constraints

AUE301P Exam Revision Summary
INDEX
Description Page(s)
01) Internal Control Structures

General 01 - 08
King III (note that there is not much info on this topic due to time constraints ) 09
02) Internal Control Structures

General CIS Controls 10 - 11
Application Controls 12 - 13
The Auditor's Approach to Internal Control Systems 14
03) Internet Based Sales

Risks & Key Control Measures 15
Application Controls To Ensure Occurrence & Authorisation & Completeness 15 - 16
04) Inventory Count 17 - 18
Prepared by: Martin van Niekerk Preparation date time: 04/06/2013 at 13:32
AUE301P Exam Revision Summary Page 1 of 18
Internal Control Structures - General
01) Take note that VALIDITY is replaced with OCCURRENCE & AUTHORISATION .
02) Assertions:
• Transactions & events
○ These relate mostly to income statement accounts
○ Related assertions:
◘ Accuracy ▬ Transactions are recorded at the correct amounts .
◘ Occurrence ▬ All recorded transactions did take place .
▬ No fictitious transactions have been recorded.
◘ Completeness ▬ There are no unrecorded transactions.
▬ All transactions that took place have been included & recorded .
◘ Cut-off ▬ All transactions were recorded on the date they took place.
◘ Classification ▬ Transactions are classified correctly according to their nature &
recorded in the correct accounts .
• Balances
These
Inventory relate mainly to the balance sheet accounts
Count
○ Related assertions:
◘ Completeness ▬ There are no unrecorded assets, liabilities or other balances .
▬ All assets, liabilities & balances that exist have been recorded .
◘ Existence ▬ No fictitious balances are recorded.
▬ All recorded balances do exist .
◘ Rights & obligations ▬ Recorded assets & liabilities belong to the entity .
◘ Valuation & allocation ▬ Assets, liabilities & equity is included at the appropriate
amounts & correctly accounted for .
• Presentation & disclosure
○ This applies to the following assertions:
◘ Accuracy
◘ Occurrence
◘ Completeness
◘ Classification
◘ Rights & obligations
◘ Valuation & allocation
02) When reliance can be placed on internal controls , Control Risk is assessed as LOW .
03) An effective accounting system = Accounting system + Internal controls
04) Characteristics of good internal control (Internal control principles )

• Control environment
• Competent, trustworthy staff
• Segregation of duties
• Isolation of duties
• Access/custody controls
• Source document design
• Comparison & reconciliation
05) Components of internal control

○ Integrity & ethical values
○ Commitment to competence
○ Participation of those charged with governance
○ Management's operating style & philosophy
○ Organizational structure
○ Assigning authority & responsibility
○ HR policies & practices
• Risk assessment
○ Define objectives of the entity, departments & functions
○ Identify & assess risks
◘ Operational risks
◘ Financial reporting risks
◘ Compliance risks
○ Respond to risks identified via
◘ The information system
◘ Control activities
• Information system
○ Assertions
◘ Accuracy
◘ Occurrence & authorisation
◘ Completeness
○ Transaction procedures
◘ Initiating
◘ Recording
◘ Processing
◘ Corrections
◘ Posting to accounting records
○ Documents
◘ Document design
◘ Documents used
○ Capturing of events other than transactions
○ Journal entries
• Control activities
○ Actions & procedures supported by policies
◘ Approval & authorisation
◘ Segregation of duties
◘ Isolation of responsibilities
◘ Access/custody controls
◘ Comparison & reconciliation
◘ Performance reviews
○ Preventative controls
○ General & application controls
• Monitoring of controls
○ Assessment over time
○ Are objectives being met?
○ Assessments at all levels incl.
◘ Directors
◘ Management
◘ Department heads
○ Independent assessments
◘ Internal audit
◘ External bodies
◘ Customers
○ Remedial action
06) Accounting cycles

• Purchases
○ Requisition
▬ Stock re-order levels trigger requisition
▬ Requisition should be authorised by the production head/buyer
◘ Accuracy
▬ Review of requisition by production head
◘ Completeness
▬ Regular review of stock levels & follow-up on excess/shortages
○ Ordering
▬ Snr clerk/buyer ensures that the requisition is authorised by the correct person
◘ Accuracy
▬ Order agreed to requisition ensuring that all amounts are correctly transferred from the
requisition to the order form
◘ Completeness
▬ Cross reference requisition to order
◘ Management should ensure
▬ That only approved suppliers are used
▬ That the necessary quotes have been obtained
▬ That the reliability & quality of the supplier & their goods are assessed
▬ Follow up on orders not yet received
○ Receiving
▬ Ensure that ONLY goods ordered are received
◘ Accuracy
▬ Agree quantity & description of goods to the order & DN
▬ Indicate corrections on delivery note & have the supplier sign it
◘ Completeness
▬ Agree orders to GRN to ensure that all orders have been received
Management should ensure
▬ That the receiving department is physically secure
▬ That the condition of goods are reviewed before accepting it
○ Recording in the GL
▬ Agree the invoice to the GRN & order
◘ Accuracy
▬ Agree the invoice to the GRN & order
▬ Ensure that the allocation of the transaction is to the correct GL account
▬ Cast & recalculate amounts on the invoice
▬ Reconcile CRS ledger to CRS control account
▬ Reconcile CRS ledger to statements
◘ Completeness
▬ Ensure that all invoices are processed timeously
▬ Reconcile GRN to processed purchase /accrual
▬ Reconcile CRS ledger to statements
○ Payment preparation
▬ 2 authorising signatures on payment requisition
▬ Signatories should agree the payment requisition to the supporting documents
▬ Signatories should cancel all documents to prevent re-submission
◘ Accuracy
▬ Signatories should agree the payment requisition to the supporting documents
◘ Completeness
▬ Creditor statement to be reconciled
06) Accounting cycles (continued)

• Purchases (continued)
○ Payment & recoding of payment
▬ Reconcile Cash Payment Journal (CPJ ) to bank statement
▬ Review returned paid cheque for unusual endorsements
◘ Accuracy
◘ Completeness
▬ Ensure that there are no gaps in the numerical sequence of payment requisitions recorded
○ Credits & adjustments
▬ All credit requests/adjustments to be authorised by independent senior personnel
▬ Review creditor statement reconciliations
◘ Accuracy
▬ All credit requests/adjustments to be authorised by independent senior personnel
◘ Completeness
▬ Reconcile Goods Returned Notes to processed credit requests
• Revenue & receipts
○ Receipt of order
▬ Ensure that the customer has authorised the order
▬ Ensure that the inventory for the order is available
▬ Ensure that customer's order is within the credit limit
◘ Accuracy
▬ Agree customer's order to internal sales order ( ISO )
▬ Confirm order details via telephone
◘ Completeness
▬ Independent person to deal with customer queries
▬ All orders recorded on ISO
○ Authorisation of orders
▬ New customers
■ Credit application form to request relevant details
■ Credit Manager to confirm references & credit worthiness
■ Credit limits to be approved by Financial Manager
○ Picking of goods
▬ Picking slips (PS ) to be authorised
▬ Supervisor agrees goods to PS
▬ PS should attached to ISO
◘ Accuracy
▬ Agree details of ISO to PS & PS should be signed as proof that it agrees to ISO
◘ Completeness
▬ Reconcile ISO's to PS's to ensure all PS's have been generated
○ Delivery
▬ No deliveries should be made without ISO's & PS's
▬ Gate control to ensure that physical stock agrees to DN (Delivery notes)
▬ Customer to sign 1 copy of DN that should be returned to entity
◘ Accuracy
▬ Agree DN details to ISO & PS
◘ Completeness
▬ Agree DN details to ISO & PS

• Revenue & receipts (continued)
○ Invoicing
▬ Invoices should agree to returned signed DN & ISO
◘ Accuracy
◘ Completeness
▬ Regular follow-up on unmatched ISO's & DN's
○ Recording of invoice
▬ Batch controls
▬ Prepare Sales Journal (SJ ) according to invoices/invoice list
◘ Accuracy
▬ Batch controls
▬ Independent reconciliation of DRS Ledger to DRS control account
◘ Completeness
▬ DN's to be reconciled to recorded invoices
▬ Ensure that there are no gaps in the sequence of recorded invoices
○ Receipt of payment
▬ Receipt should be reflected on the bank statement
◘ Accuracy
▬ Receipt should be reflected on the bank statement
◘ Completeness
▬ Reconcile receipts per bank statement to DRS's account
○ Recording of receipts
▬ Reconcile bank statement to cash book (CB)
◘ Accuracy
◘ Completeness
○ Goods returned
▬ Must be received by receiving department
▬ Goods Returned Note must be signed by customer
▬ Credit Note (CN) should be made out by an independent person
▬ CN should be adequately authorised
◘ Accuracy
▬ CN to be referred to Invoice & Goods Returned Note
◘ Completeness
○ Credit management
◘ Management should ensure that:
▬ Statements are sent out promptly
▬ Age analysis should be reviewed frequently & long outstanding items should be followed
up
▬ Write-offs should be authorised by the Cr Manager
▬ Financial manager to review the bad debt write-offs

• Payroll
○ Personnel
▬ Risks
■ Unauthorized amendments
▬ Controls
■ Sequenced Payroll Amendment Forms (PAF's) should be used
■ Requests for changes should be in writing on the PAF's & should be authorized
prior to making the changes
■ Changes are made by the personnel department, independent from the employee
& their manager
■ Masterfile amendment reports should be reconciled to PAF's by a senior in the
personnel dept.
■ Personnel files should be kept up-to-date for each employee
◘ Accuracy
▬ Risks
■ Errors are made with authorised changes
▬ Controls
■ Same as for Occurrence & authorisation
◘ Completeness
▬ Risks
■ Changes that should be made are not made
▬ Controls
■ Review PAF's for breaks in sequence
■ Change requests should be followed up timeously by the person who requested it
◘ Management controls
▬ Risks
■ The wrong or unnecessary staff are employed
■ Incorrect dismissal procedures are followed, opening up the business to labour law
consequences
▬ Controls
■ Sound personnel practices in place to deal with recruitment & dismissal
■ Recruitment & dismissal should only be the responsibility of the personnel dept .
■
○ Time keeping
▬ Risks
■ Fictitious employees on the payroll
■ Employees clocking in for each other
■ Employees clocking in & leaving
▬ Controls
■ Control entry & exit points
• Limit number of access points
• Use turnstiles limiting entry & exit
• Supervised clocking
■ Clock cards prepared by personnel department
◘ Accuracy
▬ Risks
■ Time incorrectly calculated on clock cards
▬ Controls
■ Management to inspect & authorise clock cards prior to processing
◘ Completeness
▬ Risks
■ Employees are not credited for all hours actually worked
▬ Controls
■ Ensure that there are clock cards for all employees

• Payroll (continued)
○ Payroll preparation
▬ Risks
■ Fictitious employees on the payroll
▬ Controls
■ Management to reconcile payroll summaries to previous period's payroll summary
■ Section heads to review & authorise payroll before pay-out
■ Senior payroll clerk to
• Verify time worked & rates to supporting documentation
• Re-perform calculations & agree deductions to supporting documentation
• Authorise payroll once all checks are completed
◘ Accuracy
▬ Risks
■ Use of incorrect hours, rates or deduction calculations
▬ Controls
■ Same as for Occurrence & authorisation
◘ Completeness
▬ Risks
■ Employees excluded from payroll
▬ Controls
■ Management to reconcile payroll summaries to previous period's payroll summary
■ Section heads to review & authorise payroll before pay-out
○ Payment
▬ Risks
■ Invalid payment made
▬ Controls
■ Employees to collect & sign for pay packets
■ Refer to management controls below
◘ Accuracy
▬ Risks
■ Invalid payment made
▬ Controls
◘ Management controls
▬ Risks
■ Theft of cash
■ Misappropriation of unclaimed wages
▬ Controls
■ Pay packets to be prepared by 2 independent people
■ Section heads to reconcile pay packets to original payroll & sign as proof that they
are correct
■ Cash & pay packets to be locked away until payment
■ Pay-out to be performed by 2 independent people
■ Employees to
• Identify themselves via ID's or Employee cards
• Sign as evidence of collection
• Count cash immediately & verify deductions
■ Unclaimed wages to be identified & retained by paymaster
■ Unclaimed wages to be recorded in wage register
■ Unclaimed wages to be recorded, in detail, in unclaimed wages register
■ Unclaimed wages register should be signed as evidence that above step has taken
place
■ Unclaimed wages to be banked after 2 weeks & deposit slip to be retained
■ Register should be reviewed & regularly reconciled to pay packets

• Payroll (continues)
○ Deductions
▬ Risks
▬ Controls
◘ Accuracy
▬ Risks
■ Losses due to undetected over-payment
▬ Controls
■ Independent review of deductions GL
◘ Completeness
▬ Risks
▬ Controls
Management controls
▬ Risks
■ Penalties or legal action due to late or non-payment
▬ Controls
■ Isolate responsibility to 1 person for deductions
■ Prepare & review monthly schedules for control & record keeping
Internal Control Structures - King III
01) Points to remember:

• Dispute resolution
○ The time required to resolve a dispute will have to be considered.
○ It might be in the best interest of all parties involved to resolve the matter out of court to avoid
lengthily proceedings.
• Principle & precedent
○ Should the company want to set a precedent that would be binding by the courts in the future, court
action would be more suitable.
• Business relationships
○ Good future business relationships may be maintained via mediation or conciliation .
• Expert recommendations
○ Experts may be required to devise a solution where the parties involved in a dispute do not have the
necessary expertise to do so themselves.
• Confidentiality
○ Where confidentiality is required, dispute resolution may be conducted in confidence .
• Inventory Count
○ Court proceedings usually lead to limited resolutions being adjudicated on, whereas mediation &
conciliation leaves more room for more flexible alternative resolutions .
02) Risk committee

• Requirements for the composition of te risk committee
○ Chaired by a non-exec director
○ Have a minimum of 3 members
○ Consists of exec directors , non-exec directors , senior management & if necessary, independent risk
• Responsibilities
○ Consider risks that may affect the sustainability of the entity
○ Review the risk management process & maturity of the company
○ Consider the risk management strategy & policies
○ Plan & monitor the risk management process
• Should meet at least twice a year
• Should report to the board
• Risk assessment & consideration questions
○ What's the probability of the risk occurring?
○ What's the potential affect of the risk?
○ How affective the response to the risk might be?
○ What are the threats to the business' solvency , liquidity & going concern ?
○ What is the severity of the risk ?
○ What is the risk tolerance of the company towards risks?
Internal Control Structures - General CIS Controls
01) Considerations for general controls
○ Communication & enforcement of integrity & ethical behaviour
○ Commitment to competence
○ Participation of those charged with governance
○ Management's operating style & philosophy
○ Organizational structure
○ HR policies & practices
• System development & implementation controls
○ In-house development
○ Off-the-shelf Software
○ Programme change controls
• Access controls
• Continuity of operations
○ Risk assessment
Inventory
Physical
Countsecurity
○ Disaster recovery & backups
• System software & operating controls
• Documentation
02) General controls
○ Communication & enforcement of integrity & ethical behaviour
• Organizational structure & HR policies & practices
○ Proper recruiting policies
○ Qualification verification & background checks
○ Immediate exclusion from computer facilities upon dismissal or resignation
○ Compulsory leave
○ Training & development
○ Rotation of duties
○ HR policies & practices should be formally documented
• Operating procedures
○ Job schedules should be prepared for running specific applications & jobs
○ Equipment must be operated & maintained in accordance with manufacturer's standards
○ Equipment & machine services should be done as prescribed by manufacturers
○ Users must be given specific procedures to follow when performing each task
○ All activities must be logged in an activity log to ensure unauthorised actions can be detected
○ Work areas should be kept neat & tidy
○ Standard policies & procedures should be documented & introduced for the running of physical libraries
• System development & implementation controls
○ System development MUST be subject to ISO 9000 standards
○ Costs vs. benefit studies must be done & approved
○ Project management team's responsibilities
◘ Project plans must be drawn up to include
▬ Objectives
▬ Responsible persons
▬ Deadlines
◘ Control of the project
◘ Progress monitoring
○ Involvement from all levels is crucial
◘ Users to provide info on their requirements
○ System specification & programming should be approved before the start of the project
○ Testing should be done before implementation
◘ Program tests for each program
◘ String tests
▬ Testing of a series of related and/or integrated programs
◘ Systems test to be done to ensure that all programs work together correctly
◘ User acceptance test
Internal Control Structures - General CIS Controls
02) General controls (continued)
• System development & implementation controls (continued)
○ All parties involved should provide final approval of the system
○ Training should be provided to all users of the system
○ Conversion from old to new system
◘ Old & new files should be compared to ensure that data was accurately & completely transferred
◘ Reconciliation between old & new system would ensure that all data has been accurately &
completely transferred
◘ Exception reports should be printed & investigated
◘ Approval should be given from users to ensure that user agree that data on new system is correct
◘ Evidence must be obtained from suppliers & customers with regard to balances.
○ The system must be reviewed a couple of months post implementation
• Continuity of operations
○ Physical security
◘ Physical location should be away from anything that might damage the computer system'
◘ Fire & natural disaster prevention & detection equiment
◘ UPS & generators to ensure that power surges & outages don't result in loss of data
◘ In the servers & computers should be in temperature controlled environments
◘ Access controls should be in place
▬ Physical controls
▬ Usernames & passwords assigned to each person with specific access rights attached to
each username that only allows them access to the part of the system they need to
perform their specific function
Internal Control Structures - Application Controls
01) Data processing methods

• Batch entry with batch processing
○ Data initially captured manually on source documents
○ Source documents are collected in batches & captured into a computer via control totals of the batches
○ These transactions are then processed as a batch & the masterfile is updated
○ This method is slow & available data would not be up-to-date
• On-line entry
○ Batch processing
◘ Transaction are directly captured into the computer system
◘ The transaction data is then stored in a transaction file in the computer system
◘ Control totals are created by the computer on the batch for each transaction file
◘ Transactions are the processed as batches to the masterfiles
◘ Entry of info is efficient
◘ Available data is not up-to-date
○ Real-time processing
Inventory
◘ CountTransactions data is entered as each transaction occurs
◘ Relevant masterfiles are also immediately updated
◘ Entry is efficient & data is readably available at any point in time
02) Programme controls

• Input
○ Validation checks
◘ Validate data input against masterfile
○ Computer time out facilities
◘ If inputs aren't made within a specific period, the system should log the user out
○ Matching checks
◘ Does the same as Validation checks
○ Authorisation checks
◘ Tests input against a pre-set condition
▬ Check of sales against a customer's credit limit to ensure the sale does not exceed the limit
○ Limit checks
◘ Detects when a field does not satisfy a pre-set limit
○ Reasonableness checks
◘ Only accepts data when it falls within reasonable limits compared to other data
○ Dependency checks
◘ Entries will only be accepted depending on what's entered in another field
○ Format checks
◘ Alpha-numeric checks
▬ Only accepts numeric values or alphabetic values, not both
◘ Size checks
▬ Accepts entries that does not exceed pre-set size limits
◘ Mandatory fields
▬ Checks to ensure that all mandatory information has been entered
◘ Valid character & sign checks
▬ Checks characters in a field to ensure that they are valid according to pre-set valid
characters for that field
○ Check digits
◘ An extra character is added to an account number
◘ This extra number is manipulated by the system based on the other characters from the account
number & added to the account number
◘ Example is the last digit of the South African ID number that is derived from a calculation based
on the 1st 12 digits
○ Sequence checks
◘ Detects gaps in sequence and/or duplication in data entered
Internal Control Structures - Application Controls
02) Programme controls (continued)

• Programme checks
○ Programme edit checks
◘ Sequence tests
◘ Arithmetic accuracy checks
◘ Reasonableness, consistency & range tests
◘ Limit tests
◘ Accuracy tests
▬ Cast & cross cast checks
◘ Matching of data processed against what's already in the system
○ Programme reconciliation checks
• Output controls
○ Controls that will limit the user to only perform specific actions & access depending on the user rights
allocated to their user profile
○ Printed reports/documents should indicate
◘ The name of the report
◘ The period to which it relates to
○ Distribution checklists indicating all items of output & who received it
○ Output should be recorded in a register to control movement
• Logs & reports
○ Audit trails
◘ Listings & summaries of transactions
○ Run-to-run balancing reports
◘ Ensures that opening balances plus transactions processed result in the correct closing balances
○ Override reports
◘ Reports of controls that were overridden using management privileges
○ Exception reports
◘ Reports of all activities or transactions that fell outside the set parameters of any controls
○ Activity reports
◘ Reports of all activities that took place for specific users, transactions, divisions etc.
○ Access/access violation reports
◘ Reports detailing access & unauthorised access to sensitive information
03) Masterfile amendments

• Controls
○ All masterfile amendment requests should be documented on Masterfile Amendment Request Forms
○ Masterfile Amendment Request Forms should be pre-numbered
○ Masterfile Amendment Request Forms should be authorised by senior staff/managers
○ Masterfile amendments should be restricted to a single user with the appropriate access rights
attached to their username & password
○ Screen aids & programme checks should limit changes to the Masterfile according to pre-set conditions
◘ See input & program checks above
○ Master file amendments should be reviewed for
◘ Authorisation
◘ Accuracy
◘ That they were completely recorded via ensuring that there are no gaps and/or duplication in the
sequence report
◘ Reconciliation should be done between Masterfile Amendment Request Forms & Masterfile
Amendment Report in regular intervals
Also read through Appendix 1 on pages 117 - 121 of the study guide
Internal Control Structures - The Auditor's Approach to Internal Control Systems
01) Methods of gather information & gaining an understanding of various components of internal controls
• Do a systems walk-through test
• Have meetings with management & users & enquire about how the system should work & any problems that
occur & how frequently they occur
• Discuss risk areas with the MD
• Inspect all documentation used for various transactions cycles , procedure manual & also prior year's audit
system notes & working papers , should they be available
• Observe the internal control process & document what happens in the different cycles
• Internal control questionnaires could be given to staff & management, from which the internal control
procedures & objectives can by assessed & analysed
• All finding from above procedures should be documented and/or flow charts drawn up giving a visual
description of the internal controls & procedures
02) When designing control systems , take into account the principals of good internal control
• Inventory Count
• Segregation of duties
• Isolation of responsibility
• Access & custody controls
• Source document design
• Comparison & reconciliation
Know these points & what they're all about, off by heart, as it's the crux for
identifying risk areas in internal controls & designing tests of control
03) Questions to always ask yourself

• Who carries out the control?
• How do they carry out the control?
• When are controls carried out?
• What controls are carried out?
• On what document is are controls carried out?
Internet Based Sales
01) Risks Key control measures

Creditworthiness • Checks should be in place to confirm that credit cards
• Orders accepted from clients who can't make payment used are valid through the implementation of SET (secure
electronic transaction) by major credit card companies
• Normal credit checks to be done to assess the
customer's creditworthiness via ITC checks
Down-time • Reliable Internet Service Providers should be
• Down time due to connectivity problems could result & contracted to ensure that there is no connectivity
loss of income • Employ experienced IT personnel to manage down-time
from the entity's side due to system failures
• Have a good disaster recovery plan in place
• Install a generator to manage power failures
• Ensure that regular hard- & software maintenance is
done
Orders not received or captured • Allow for a platform where customers can follow up on
their orders
Deliveries not reaching the customer in good time • Allow for a platform where customers can follow up on
• Orders being delivered late could result in loss of their orders
income due to customers taking their business elsewhere
Un-authorised access • Implement & maintain anti-virus & anti-spyware
• Internet viruses & malicious programs such as worms & • Install & maintain a firewall on the entity's server
Trojans may gain access to the entity's system resulting in • Regular backups should be made & stored offsite
loss of data or unauthorised access to sensitive or
restricted company information
Non-compliance with relevant legalities with regard to • Ensure that the website is designed in accordance with
electronic trading all legal aspects & requirements
Contractual agreements may not adequately limit liability • All contracts should be reviewed by experienced legal
to the entity i.r.o. transactions, information & money flow advisors to ensure that rights & responsibilities are clearly
over the internet stated
Dishonest employees may disclose sensitive information • Contracts & disclaimers on the website should clearly
over the internet in contradiction to the company & state the limitations of liability
managements views & policies
• This may increase the risk of lawsuits against the
company
Internet-based systems have inadequate audit trails • Detailed procedures & transaction logs should be kept
• This may make it difficult for the entity to defend itself & reviewed regularly to detect unusual transactions
against legitimate & fictitious claims
02) Application Controls To Ensure Occurrence & Authorisation & Completeness
• Occurrence & authorisation of internet orders
○ Orders should only be accepted after the customer has provided identification & authorisation via:
◘ For subscribers
▬ Obtain personal details over the internet that can be authenticated
■ ID numbers
■ Credit Card numbers
▬ Provide them with a PIN or password that must be used to identify & authenticate the
subscriber when it logs on to the website
▬ Restricting the method of payment to valid credit card holders only
◘ For other customers
▬ They should be given a separate log-on details based on existing customer details
▬ The customer should be provided with a unique username & password to log on to the
website after all credit & authentication checks have been done
▬ These customers should log on to a separate portal area on the site
▬ Available credit checks should be done, taking into account physical & on-line orders ,
before the order is accepted
• Completeness of transactions
○ Security techniques should be implemented that
◘ Encrypts sensitive data
◘ Ensure data integrity & completeness
◘ Displays the subscription/order back to the customer with a button requiring them to accept the
details
◘ The step above could also be done via email confirmation sent to the subscriber/customer
◘ Produce transaction & transmission logs that are reviewed by an independent person to ensure
all transaction were received
◘ Produce error logs that are reviewed & error should be investigated
◘ Automatically generates a sequential subscription/order number for the transaction
◘ Performs sequence checks & provides exception reports that are reviewed by management
◘ Performs missing data checks
• General user controls
○ See general CIS Controls
Inventory Count
01) Basic principals that should be adhered to

• Planning & preparation should cover the following
○ Date & time of the inventory count
○ Method of counting
◘ Tag system
◘ 100% count twice
○ Staff requirements
◘ 1 person from warehouse & 1 independent person per team
◘ Number of teams needed
○ Supervision
◘ Who will be the count controller
○ Warehouse preparation
◘ Tidying of shelves
◘ Unpack half empty boxes
◘ Marking of damaged, slow-moving & obsolete stock
◘ Keeping alike goods together
○ Drafting of warehouse floor plans
◘ Identifying count areas for teams
○ Identifying all locations & categories of inventory
• Design of stationary
○ Inventory sheets
◘ Printed
◘ Sequentially pre-numbered
◘ Inventory details that should appear on inventory sheets
▬ Inventory item number
▬ Inventory category & location
▬ Columns for 1st & 2nd counts
▬ Columns for discrepancies
▬ Columns for prices
○ Inventory tags
○ Inventory adjustment forms
• Written instructions
○ Detailed instructions on dates, times & locations for the count
○ Identifying count teams & responsibilities
○ Method of counting
○ Identifying damaged, slow-moving & obsolete stock
○ Controls over issue & return of inventory sheets to count controller
○ Procedures to follow should problems arise
Inventory Count
01) Basic principals that should be adhered to (continued)

• At the count
○ Counters should be in team of 2 with 1 being totally independent
○ Each team should be given a floor plan , marking the areas they are to held accountable for
○ Inventory should be counted twice & 1st & 2nd count should be marked differently
○ Damaged, slow-moving & obsolete stock should be clearly marked as such & detailed on the inventory
sheets
○ Sample checks should be done to ensure that the contents agree to the descriptions per the stock
sheets
○ The count controller should
◘ Ensure , on completion of the count, that all items have been tagged
◘ Ensure that 1 st & 2 nd counts have been done & agree & agree to the quantities per the stock
sheet
◘ Ensure that recounts are performed where discrepancies have been identified
◘ Obtain cut-off numbers for
▬ GRN's
▬ Invoices
▬ DN
▬ Good returned notes
◘ Ensure that all procedures have been followed
◘ Check inventory sheet number sequences to ensure all sheets are accounted for
○ Inventory should not be despatched during stock counts
○ Inventory received after the count should be
◘ Kept separately
◘ Counted after the stock count is completed & added to inventory sheets afterwards
○ Counters responsible to stock sheets should
◘ Draw lines through blank spaces on all sheets
◘ Sign each stock sheet
○ Count teams may only be dismissed after the count is completed & all discrepancies are resolved

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AUE301P Exam Revision Summary

01) Internal Control Structures

02) Internal Control Structures

03) Internet Based Sales

04) Inventory Count 17 - 18

03) An effective accounting system = Accounting system + Internal controls

04) Characteristics of good internal control (Internal control principles )

05) Components of internal control

06) Accounting cycles

06) Accounting cycles (continued)

06) Accounting cycles (continued)

06) Accounting cycles (continued)

06) Accounting cycles (continued)

06) Accounting cycles (continued)

01) Points to remember:

02) Risk committee

01) Data processing methods

02) Programme controls

02) Programme controls (continued)

03) Masterfile amendments

03) Questions to always ask yourself

01) Risks Key control measures

01) Basic principals that should be adhered to

01) Basic principals that should be adhered to (continued)

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