Healthy Gourmet Company Limited (HG) operates a shop selling organic food. In February 2020, HG launched a

Fantastic news! We've Found the answer you've been seeking!

Question:

Healthy Gourmet Company Limited (“HG”) operates a shop selling organic food. In February 2020, HG launched a new mobile app called “Healthy Steps.” After downloading the app for free, individuals can register as a member. The “Healthy Steps” app will automatically record any walking at a rate of 1 step to 1 Step Point. Every 2,000 Step Points is equivalent to $1. Members can then redeem the Step Points when purchasing at HG’s shop.

In order to incorporate the members’ information and the corresponding Step Points into the current accounting system, HG has implemented a new in-house developed accounting system. The new system was tested for two months before actual implementation.

Required: Assume you are the audit manager for the financial statements of HG for the year ended 31 December 2020.

(a) Compare and contrast the TWO conversion approaches: pilot system approach and parallel operation approach. Which conversion approach do you consider HG should adopt? (4 marks)

(b) Propose some procedures you would expect the management have put in place in order to demonstrate that the new in-house developed accounting system has been properly migrated from the old system. (5 marks)

(c) Suggest some typical general IT controls and specific application controls you would expect to be present in HG’s “Healthy Steps” app. (6 marks)

(d) Propose some audit procedures to test the controls mentioned in part (c).