The following internal controls were tested in prior audits. Evaluate each internal control independently and determine which

Question:

The following internal controls were tested in prior audits. Evaluate each internal control independently and determine which controls must be tested in the current year's audit of the December 31, 2011 financial statements. Be sure to explain why testing is or is not required in the current year.

1. The general ledger accounting software system automatically reconciles totals in each of the subsidiary master files for accounts receivable, accounts payable, and inventory accounts to the respective general ledger accounts. This control was most recently tested in the prior year. No changes to the software have been made since testing and there are strong controls over IT security and software program changes.
2. The accounts payable clerk matches vendor invoices with related purchaser orders and receiving reports and investigates any differences noted. This control was tested in the 2010 fiscal year end audit. No changes to this control or personnel involved have occurred since testing was performed.
3. The sales system automatically determines whether a customer's purchase order and related accounts receivable balance are within the customer's credit limit. The risk of shipping goods to customers who exceed their credit limit is deemed to be a significant risk. This control was last tested in the December 31, 2009 financial statement audit.
4. The perpetual inventory system automatically extends the unit price times quantity for inventory on hand. This control was last tested in the audit of December 31, 2009 financial statements. During 2011, the client made changes to this software system.
5. The client's purchase accounting system was acquired from a reputable software vendor several years ago. This system contains numerous automated controls. The auditor tested those controls most recently in the 2010 audit. No changes have been made to any of these controls since testing and the client's controls over IT security and software program changes areexcellent.

Accounts Payable
Accounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive... Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...