- D Use the information below to answer the following two questions: You have been assigned to the audit of Classic Designs Inc, an audit client of your firm R & W Chartered Professional Accountants You are responsible for evaluating the internal controls in place over the acquisition and payment tyde in this year's audit. The following is a description of the system based on your discussions with the client staff Classic Designs Inc. is a wholesaler of women's clothing and accessories: they specialize in mid- to high-end products. Classic Designs is located in Edmonton, Alberta, but due to their easy to navigate website and free shipping and returns policies, sales are made to customers across the world. Most of the items purchased for resale are from countries other than Canada Classic Designs tends to buy in bulk to take advantage of volume rebates and to avoid stock outs. The company maintains a perpetual inventory system, Because the companys sales volume is high, they must maintain large amounts of inventory, which is stored in a warehouse in Edmonton located next to the accounting department. The warehouse is managed by Sally jansen (Warehouse Manager) Sally supervises three warehouse staff, who are responsible for both shipping and receiving inventory Sally is the only person authorized to purchase products for Classic Designs. She places online orders directly with suppliers who offer their products for sale on their websites. When Sally places an order, she prints the order details from the supplier's website and files these orders by supplier name in a filing cabinet in the warehouse. Within 1-2 weeks of the order, suppliers send the products (along with packing slips) which are received by the warehouse statt. Sally purchases items from over 50 suppliers because they all offer unique products. If Sally finds a new supplier she would like to use, she fills out a form with all of the suppliers information (name, mailing address, telephone number, and contact person) and gives the form to the accounts payable clerk, who will set the new supplier up in the system Sally does not have access to the general ledger When the items are received the warehouse staff retrieve the coples of the order details from the filing cabinet in the warehouse and compare the amounts received to the amounts on the order. A receiving report is prepared that summarizes the quantity and type of Inventory received. If products are damaged or missing the warehouse staff notifies Sally, who, in turn, notifies the supplier. They then make a note of the discrepancy on the order and the receiving report. Therefore the receiving report shows only the goods that were received in good condition. The receiving reports ace attached to the orders and given to Sally, Sally compares the amounts on all the documents, initiak the receiving report as approved, and gives the paperwork to the account payable cerk invoices from suppliers are received in the mail (usually 2-3 weeks after the goods are received and are opened by the accounts payable der. When the invoices are received, the accounts payable clerk agrees the details from the invoice to the receiving report and to the original order finds the supplier in the system, and enters the amount on the invoice into the system for payment for triventory Accounts Payable). If there were any descrepancies noted on the receiving report by the warehouse statt, the clerk makes sure that the supplier adjusted the invoices to reflect the quantities actually received on the receiving report The derk then attaches the invoice to the receiving report and the order and processes the payments Classic Designs run cheques every Thursday. The President must approve cheques over $5.000. Otherwise, they are signed electronically by the accounts payabilecek Twice per year, Sally and the warehostat do an inventory count there are differences Sally must approve them before they are processed in the system in the past few years, the book to physical custment has been grad increasins from 5.600 in 30110 595 500 in 2020 M m Me Sub 1.3 acer Required: in the tables provided below. Describe one significant internal control strength. For the control strength explain how the control would prevent detect, or correct errors. Then describe a procedure that describes how the auditors would likely test the control. Be specific (dmarks Identity two significant internal control weaknesses. For each control weakness describe the weakness incital and explain how an error could occur as a result of the weakness. Then, provide management with recommendations for improvement. Note at least one or your weaknesses must relate to a lack of segregaton of duties. Be specific 08 marks) NoteDo not click anywhere outside of the tables below. If you accidentally delete a complate you can try to undo it by hold down both the cut and Y keys. If that doeselt work, you need to continue on without the template in the blank space. No time extension or grade allowances will be given for this. Questo 40 Use the table A B I Internal Control Strength (1 mark) How Internal Control Prevents, Detects, and/or Corrects Errors (1 mark) Test of Control (2 marks) Use the table below to describe two internal control weaknesses. Only the first two will be marked. 18 marks) Remember, at least one of the weaknesses you identify must relate to a lack of segregation of duties. 7 A B 1 Internal Control Weakness (1 mark each) Risk/Implication (1 mark each) Recommendation (2 marks each) 2. From your experience working at your current or past employer, given one example of an internal control over the processing of payroll at your workplace. Be sure to be specific when you are describing the internal control. Then describe how the internal control prevents, detects, or corrects fraud or error. Lastly, describe how you, as an auditor, would test whether that control is operatirig effectively. If you have not had any work experience, please feel free to use an example of an internal control strength from what you've learned in this course. (4 marks) 7 A BI Internal Control Strength (1 mark) How Internal Control Prevents. Detects, and/or Corrects Errors (1 mark) Test of Control (2 marks) M - D Use the information below to answer the following two questions: You have been assigned to the audit of Classic Designs Inc, an audit client of your firm R & W Chartered Professional Accountants You are responsible for evaluating the internal controls in place over the acquisition and payment tyde in this year's audit. The following is a description of the system based on your discussions with the client staff Classic Designs Inc. is a wholesaler of women's clothing and accessories: they specialize in mid- to high-end products. Classic Designs is located in Edmonton, Alberta, but due to their easy to navigate website and free shipping and returns policies, sales are made to customers across the world. Most of the items purchased for resale are from countries other than Canada Classic Designs tends to buy in bulk to take advantage of volume rebates and to avoid stock outs. The company maintains a perpetual inventory system, Because the companys sales volume is high, they must maintain large amounts of inventory, which is stored in a warehouse in Edmonton located next to the accounting department. The warehouse is managed by Sally jansen (Warehouse Manager) Sally supervises three warehouse staff, who are responsible for both shipping and receiving inventory Sally is the only person authorized to purchase products for Classic Designs. She places online orders directly with suppliers who offer their products for sale on their websites. When Sally places an order, she prints the order details from the supplier's website and files these orders by supplier name in a filing cabinet in the warehouse. Within 1-2 weeks of the order, suppliers send the products (along with packing slips) which are received by the warehouse statt. Sally purchases items from over 50 suppliers because they all offer unique products. If Sally finds a new supplier she would like to use, she fills out a form with all of the suppliers information (name, mailing address, telephone number, and contact person) and gives the form to the accounts payable clerk, who will set the new supplier up in the system Sally does not have access to the general ledger When the items are received the warehouse staff retrieve the coples of the order details from the filing cabinet in the warehouse and compare the amounts received to the amounts on the order. A receiving report is prepared that summarizes the quantity and type of Inventory received. If products are damaged or missing the warehouse staff notifies Sally, who, in turn, notifies the supplier. They then make a note of the discrepancy on the order and the receiving report. Therefore the receiving report shows only the goods that were received in good condition. The receiving reports ace attached to the orders and given to Sally, Sally compares the amounts on all the documents, initiak the receiving report as approved, and gives the paperwork to the account payable cerk invoices from suppliers are received in the mail (usually 2-3 weeks after the goods are received and are opened by the accounts payable der. When the invoices are received, the accounts payable clerk agrees the details from the invoice to the receiving report and to the original order finds the supplier in the system, and enters the amount on the invoice into the system for payment for triventory Accounts Payable). If there were any descrepancies noted on the receiving report by the warehouse statt, the clerk makes sure that the supplier adjusted the invoices to reflect the quantities actually received on the receiving report The derk then attaches the invoice to the receiving report and the order and processes the payments Classic Designs run cheques every Thursday. The President must approve cheques over $5.000. Otherwise, they are signed electronically by the accounts payabilecek Twice per year, Sally and the warehostat do an inventory count there are differences Sally must approve them before they are processed in the system in the past few years, the book to physical custment has been grad increasins from 5.600 in 30110 595 500 in 2020 M m Me Sub 1.3 acer Required: in the tables provided below. Describe one significant internal control strength. For the control strength explain how the control would prevent detect, or correct errors. Then describe a procedure that describes how the auditors would likely test the control. Be specific (dmarks Identity two significant internal control weaknesses. For each control weakness describe the weakness incital and explain how an error could occur as a result of the weakness. Then, provide management with recommendations for improvement. Note at least one or your weaknesses must relate to a lack of segregaton of duties. Be specific 08 marks) NoteDo not click anywhere outside of the tables below. If you accidentally delete a complate you can try to undo it by hold down both the cut and Y keys. If that doeselt work, you need to continue on without the template in the blank space. No time extension or grade allowances will be given for this. Questo 40 Use the table A B I Internal Control Strength (1 mark) How Internal Control Prevents, Detects, and/or Corrects Errors (1 mark) Test of Control (2 marks) Use the table below to describe two internal control weaknesses. Only the first two will be marked. 18 marks) Remember, at least one of the weaknesses you identify must relate to a lack of segregation of duties. 7 A B 1 Internal Control Weakness (1 mark each) Risk/Implication (1 mark each) Recommendation (2 marks each) 2. From your experience working at your current or past employer, given one example of an internal control over the processing of payroll at your workplace. Be sure to be specific when you are describing the internal control. Then describe how the internal control prevents, detects, or corrects fraud or error. Lastly, describe how you, as an auditor, would test whether that control is operatirig effectively. If you have not had any work experience, please feel free to use an example of an internal control strength from what you've learned in this course. (4 marks) 7 A BI Internal Control Strength (1 mark) How Internal Control Prevents. Detects, and/or Corrects Errors (1 mark) Test of Control (2 marks) M