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Test 2 CAUC 031 - Solution FINAL 2021
Test 2 CAUC 031 - Solution FINAL 2021
SCHOOL OF ACCOUNTANCY
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QUESTION 1
YOU ARE REQUIRED TO:
1.1 . Describe the internal controls that can be implemented to minimise the risks listed 15
above
And
List the internal control objective(s) for financial reporting affected by each of the
risks listed above.
You are required to present your answer in the tabular format below:
Risk Internal Control Control Objective(s)
1
Presentation Skills: Structure and Layout
2
R4 Prior to entry in the sales journal, invoices should 1 Accuracy and 1
be added to obtain a control total. validity 1
This control total should then be compared to the 1
total in the sales journal after entry of individual
invoices.
R5 Completeness 1
1
All amounts received should be banked daily.
Available 22
Maximum 15
Presentation Skills: Structure and Layout 1
Destruction of data: The internet bank account itself or account details could be deleted. 1
“Theft” of data: Bank account details could be stolen and abused. 1
Improper changes to data: Payment beneficiaries’ details could be changed in order to 1
channel payments to unauthorised accounts.
Recording of unauthorised or nonexistent transactions: 1
Unauthorised transfers of money could be done. 1
Available 5
Maximum 4
1.3 Describe the access controls that should be implemented to ensure good control 4
over a bank account.
The terminal onto which the bank’s software is loaded should be in the debtors’ section, 1
usually the terminal of the senior debtors’ clerk.
1
Access to the bank’s site should be gained in the normal manner, but to access the 1
company’s bank account, the senior debtors’ clerk should be required to enter a 1
username and a password.
The system should automatically shut down after several failed attempts to login e.g. 1
system should be configured to shut down after 3 unsuccessful attempts.
System should shut down if inactive for a certain period of time. 1
Available 6
Maximum 4
3
4
1.4 Provide a list of good password controls which can form part of access controls over 5
a bank account.
QUESTION 2
You are required to present your answer in the tabular format below:
Weakness (10 Marks) Risk (16 Marks)
Weakness Risk
The invoices received from suppliers are 1 Mega Bricks Mankweng (Pty) Ltd could
not matched to any other documents be paying for goods which were:
e.g. internal order, supplier delivery note 1.1 Never ordered or never delivered 1
or goods received note.
1.2 Incorrect in terms of description, 1
quantity or price.
Invoices received from suppliers are not
1 Some invoices received may remain 1
recorded on a register.
unpaid.
No recalculation of the invoice is 1 This may result in inaccurate payments 1
performed before the amount/invoice is and under recovery of VAT.
recorded.
(e.g casts, extensions, calculations and
VAT)
The quantities of the goods per the invoice 1 1
5
is not compared to the GRN. This may result in inaccurate recording in
The unit prices on the invoice is not 1 the accounting records.
compared to the purchase order.
Before the invoice/statement amount is 1 If nobody checks the above, the risk that 1
paid (goods paid for) there is no check to employees are purchasing goods for
confirm that the purchase was authorised. themselves and having the company pay,
is significantly increased
Or even that the goods purchased are of a 1
type used by Mega Bricks Mankweng (Pty)
Ltd.
The full amount as reflected on the 1 Mega Bricks Mankweng (Pty) Ltd may be 1
statement is paid, even where no invoice paying for goods incorrectly charged to
has been received. them.
1
The fact that Cameron Mkhize carries out
on screen random tests is no control at
all.
Furthermore, nobody at any stage (before 1
or after the payment) checks
whether payments to creditors or others
are valid.
1
Payments may be
intentionally misstated to
hide fraud.
Payments may be 1
recorded inaccurately
(errors).
1
Payments may not be
recorded at all.
No segregation of duties between 1 There is a risk that 1
employees employees are purchasing
goods for themselves and
having the company pay.
Payments can be made to 1
fictitious creditors.
8
alterations to it, were not
authorised or made by her.
Almost total lack of involvement of senior 1 The lack of this 1
personnel/owner. involvement weakens the
control environment
considerably and
facilitates fraud and
collusion
Available 20 Available 29
Maximum 10 Maximum 16
QUESTION 3
Preparation and planning of the count was inadequate (no count planning meeting held). 1
Segregation of duties: Staff members were not assigned to the different functions that has 1
to be performed (i.e. inventory count controller, supervisor and counters.)
Detailed instructions for the different functions were not communicated to all staff 1
members involved in the inventory count.
The timing of the count was not appropriate. During trading hours 1
Floor area is not sketched as to plan the way the count was to be conducted. 1
There is no evidence that the warehouse was prepared for the count; although it is “tidy”, a 1
number of procedures should have taken place.
Marking damaged, slow moving obsolete goods. 1
Preparing a secure area for deliveries to be received during the count. 1
Areas are not numbered according to the prepared plan/sketch. 1
Count stationery was inadequately designed and incomplete. 1
No inventory control sheet or register to record the number of sheet issued and to whom it 1
9
was issued.
There is no mention of whether the inventory sheets have been made in pen (permanent 1
ink).
The inventory sheets does not have columns for second count and discrepancies. 1
No count controller, so no walk through of the warehouse once the count is complete, and 1
no method of determining whether all inventory has been counted.
No procedures conducted to ensure that goods received or dispatched during the count 1
were properly accounted for.
The numerical sequence of the inventory sheets were not inspected after the count had 1
taken place to ensure that all sheets have been returned.
Inventory sheets were not signed by the staff members after the count was conducted. 1
Available 25
Maximum 16
Communication Skills: Clarity of Expression 1
3.2 8
List and explain four types of test of controls that auditors can use when testing
internal controls.
Present your answer in a tabular format as follows:
10
knowledgeable persons inside or outside the
entity.
Available 5 Available 6
Maximum Maximum
4 4
11