The following questions are part of an internal control questionnaire for the acquisition and expenditure process. The
Question:
a. Are competitive bids received and reviewed for certain items?
b. Are receiving reports prepared for each item received and copies transmitted to the inventory storerooms, the purchasing department, and the accounting department?
c. Are vouchers cancelled with a PAID stamp when paid?
d. Are purchase order forms and receiving report forms prenumbered and the numerical sequence checked for missing documents?
For each question:
(1) Describe the misstatement in the financial statements that could occur if the client answered the question “no.”
(2) Explain how you would design a substantive test to evaluate the potential misstatement in the financial statements due to the missing control.
(3) If the client answers “yes” to the question, describe an internal control that the client could use.
(4) Describe how you could test the internal control described in part (3).
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Related Book For
Auditing and Assurance Services An Applied Approach
ISBN: 978-0073404004
1st edition
Authors: Iris Stuart
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