Required

For each of the following tests of internal controls over acquisition and inventory, indicate the effect of the deficiency on the planning of direct tests of the related account balances.

1. The client utilizes an automated purchasing system. However, in the tests of controls, the auditor finds that access to the system is not restricted as authorized. The auditor finds that purchasing agents routinely override purchase requisitions and also add new vendors without going through the approval process required by company policies.

2. The client does not record returned merchandise.

3. The client does not take cycle counts of the perpetual inventory system. However, other controls over receipt and shipment of inventory are working.

4. The client does not employ a systematic process to evaluate the potential obsolescence in inventory.

5. Many of the travel and expense reimbursements to top management are not accompanied by receipts, or a description of the purpose of the expenditure.

6. Analytical procedures of expense accounts indicate that they are low in comparison with (a) previous years and (b) in relationship to sales.