Suggested Solution 20 - Beats Co 20

(a)
Direct controls are specific controls which are precise enough to address the risk of
material misstatement at the assertion level, for example, performing a monthly
reconciliation of the bank account which is reviewed, and all differences are resolved.
This is an example of a direct control as it ensures the existence and accuracy of the
asset (bank) at the period end.

Reconciliations – Reconciliations compare two or more data elements for example bank
reconciliation statements. If differences are identified, action is taken to bring the data into
agreement. Reconciliations generally address the completeness or accuracy of
processing transactions.

Verifications – Verifications compare two or more items with each other or compare an
item with a policy for example comparing expense with budget or invoice with Goods
Received Note (GRN) and will likely involve a follow-up action when the two items do not
match. Verifications generally address the completeness, accuracy, or validity of
processing transactions

Physical or logical controls - These include:

• The physical security of assets, including adequate safeguards such as secured

facilities over access to assets and records.
• The authorisation for access to computer programs and data files (i.e., logical
access).
• The periodic counting and comparison with amounts shown on control records (for
example, comparing the results of cash, security and inventory counts with
accounting records).

Segregation of duties - Assigning different people the responsibilities of authorizing

transactions, recording transactions, and maintaining custody of assets.