4) Design FIVE (5) substantive procedures for the transactions and balances discussed in question (3) and justify why you select these substantive procedures for BOTH of the following scenarios:

1. Your proposed tests of controls in question (3) PASSED.
2. Your proposed tests of controls in question (3) FAILED.

So how do i tackle question 4?

What i did for question 3:

3) Identify or assume TWO(2) high level/detective internal controls and propose a control test for each control in ANY of the following processes.

Cash receipt and payment

In view of Sheng Siong Group Ltd's (Sheng Siong) financial statements for the year ended 31 December 2020, I will be performing a financial report audit and identify key high level/detective internal controls and their respective control tests.

Cash receipt arising from supermarket operations

In Sheng Siong's case, a significant volume of the sales from supermarket operations is obtained from cash sales. Since cash is the most liquid out of all assets, strong internal controls must be set in place to ensure adequate control over it. In consideration of the high volume of cash transactions, there is the risk of misappropriation of cash and cash sales may not be recorded. We assessed the Group's internal controls and observed the following:

Firstly, there is segregation of duties over the recording of sales, collection, and custody of cash. Processes are set in place to ensure segregation of duties by tasking different clerk or staff to have separate responsibility of recording of sales and collection of cash. This is because certain job scope responsibilities are mutually incompatible and if left unchecked, allows one person too much control over the company's assets. A record of all cash receipts is made as soon as cash is received by another staff, to ensure that each receipt is readily traceable. This is an indication of a strong internal control as most thefts occur before a record of the receipt is made. Also, the manager oversees depositing all cash receipts made on the day that they are received or the next working day as undeposited cash is more vulnerable to misappropriation. And additionally, duties are arranged so that the personnel in charge of handling the cash receipts do not record the receipts into the accounting records. Cash is the most easily mishandled out of all the company's assets be it due to theft or carelessness, and the test of control can be to physically observe whether separate personnel is in charge of doing each of these tasks.

The second point is there is further segregation of duties over the cash payments and reconciliation of bank accounts. Duties are arranged by the company so that the personnel who oversees cash receipts do not disburse the cash. Considering the size of the company, a large amount of its cash is spent by checks and controls over checks and authorization for cash payments have to be in place. Controls by the Group includes all disbursements are to be made by check or petty cash, and proper approval for all disbursements must be obtained and recorded. The checks are numbered serially, and access is limited to employees authorized to write the checks. Two signatures are required on each check so that a single person cannot withdraw the funds and there is arrangement of duties so that the staff who authorizes payment of a bill does not sign checks. Further emphasis on the principle of segregation of duties is ensured as the staff who signs the checks do not have access to cancelled checks and is not involved in the preparation of the bank reconciliation statements. The personnel in charge of preparing the bank reconciliation has no other duties regarding cash. The test of control can be to physically observe whether separate personnel is in charge of doing each of these tasks, as well as ensuring proper procedures regarding disbursements are being followed and authorized by the appropriate personnel by verifying the signatures on a sample of checks.