During its assessment of the accounts payable department, the internal audit function identified the following observations, which
Question:
During its assessment of the accounts payable department, the internal audit function identified the following observations, which have been agreed to by management;
1. Inadequate segregation of duties over certain information system access controls. Potential loss exposure of $45 million.
2. Several instances of transactions that were not properly recorded in subsidiary ledgers. Transactions were not material either individually or in the aggregate. Potential loss exposure of $60 million.
3. A lack of timely reconciliation of the account balances affected by the improperly recorded transactions. Potential loss exposure of $25 million.
4. Management and the independent auditors have determined that an amount less than $20 million is inconsequential in impact and that an amount greater than $80 million is material in impact.
Based only on these facts, determine the following for each observation;
- I. The COSO objectives category affected by each observation.
- Classify each observation in terms of its design adequacy and operating effectiveness.
- Assess whether each observation is insignificant, significant, or material.
- And finally, provide your overall conclusions f0; this audit 5f accounts payable-
II. Describe what should be communicated and to whom, regarding these observations and conclusions by:
1. Internal audit, and
2. Company management.
Accounting Information Systems
ISBN: 9780132871938
11th edition
Authors: George H. Bodnar, William S. Hopwood