Audit Practice Set Part 2: Control Testing

Instructions:

Respond to each question with complete sentences and reasoning to support your answer. Cite sources.

Part A: You have documented your understanding of GPCs internal controls and your preliminary assessment that control risk is low. You are about to begin testing the controls. Consider each of the following controls. Indicate the anticipated results (what you would expect to find if the control is functioning properly) and the potential problem which could exist if the control is not functioning properly.

#	Control	What is the auditor looking for? (What does the auditor expect to see assuming effective controls?)	What problems could occur if the control is not effective?
1	Verify the pricing of an invoice against an approved pricing list
2	Trace the amount of the remittance to the validated bank deposit slip filed in the office of the assistant to the president
3	Verify that customer credit has been approved.
4	Cash deposits are made daily

Part B: Think about errors and fraud that could occur and/or fail to be detected due to the following weakness. Complete the table to communicate the potential problem.

#	Internal Control Deficiency	What error(s) or fraud may not be prevented or detected due to the internal control deficiency?
1	Sales invoices are prepared and mailed prior to delivery of the goods.
2	Accounts receivable are not written off on a regular basis.