AS 2, paragraph 11 defines preventive controls as having, “.the objective of preventing errors or fraud from occurring in the first place that could result in a misstatement of the financial statements.” Detective controls, “have the objective of detecting errors or fraud that have already occurred that could result in a misstatement of the financial statements.”

Required:

Set up a work paper with two columns. Using the discussion of ITGC presented in Appendix 2, classify the various controls as preventive or detective controls. Are there any you placed in both columns because the serve both a preventive and detective function? Use a “P” for preventive and a “D” for detective.

Examine your controls. (1) Are there any preventive controls that you believe are less important if a related detective control is effective? What would the related detective control be? Explain how it would compensate.(2) Are there any detective controls that you believe are less important if the related preventive controls are effective?

What would the related preventive control be? Explain who it would compensate. This is confusing