QUESTION 2 ISA 400 'Risk Assessments and Internal Control' identifies a number of key procedures which auditors should perform if they wish to rely on internal controls and reduce the level of weakness or substantive testing they perform. Required: (a) Explain with suitable examples FOUR elements of an effective internal control system. (4 Marks) You are the audit manager of Sweet Sensation (SS) PLC, an expanding fast food company that operates from a large number of retail outlets in the UK. Sales are predominantly in cash with a few being paid with debit or credit cards. Sales receipts are checked and banked on the next working day or as soon as practically possible by a supervisor who is also responsible for postings into the cash book. Directors have informed you that the internal controls as regards cash handling are robust and effective, however you are not happy with the result of your compliance testing. Required: (b) (c) Describe and explain FOUR control objectives of the audit of cash and bank balances. (4 marks) What further audit work will you perform in order to validate the reported amount cash and bank in the Financial Statements of Sweet Sensation PLC? (8 Marks) For what TWO purposes may an auditor request a 'Bank Confirmation Letter'? (4 Marks) TOTAL 20 MARKS (d)