The interrelated components of the system of internal control are as follows:

$($i$)$ control environment;

$($i$)$ the entitys risk assessment process;

$($i$)$ the entity's process to monitor the system of internal control; $($in$)$ the information system and communication; and

$($v$)$ control activities.

At your audit client, Black $\text{'}$n Blue Ltd$,$ the following policies, procedures or conditions exist.

$1.$ There is strong segregation of duties in the inventory cycles between receiving inventory, its custody, the issue of inventory and the recording of all movement in the perpetual inventory records.

$2.$ The board of directors and senior management meet every six months to identity the challenges facing the company and how successfully they are being addressed

$3.$ The company's organizational structure is designed in such a way as to provide the board with a realistic chance of achieving its objectives on an ongoing basis.

$4.$ The human resource department goes to great lengths to define the skills necessary for each job category and to recruit suitable personnel.

$5.$ The financial director meets frequently with the financial accountant to ensure that information required to be disclosed by IFRS $($the reporting standard used by the company$)$ is properly accumulated, recorded and processed.

$6.$ Access to the company's network is controlled by using comprehensive logical controls, for example user IDs, user profiles and passwords, and is granted on a need$-$to$-$know basis.

$7.$ The recording in the general ledger of sales, purchases etc., processed by the computer, is achieved by passing journal entries. All journal entries are scrutinized and authorized by two senior financial accounting$-$department employees.

$8.$ New cloud usage policies have been implemented at Black $\text{'}$n Blue as the company moves to software$-$as$-$a$-$service as it is more cost efficient and sustainable.

$9.$ All transactions keyed into the computer via terminals are subject to a wide range of input controls.

$10.$ The internal audit department conducts frequent reviews of breakdowns in internal control and how these are corrected

$11.$ To enter Black' n Blue Ltd$.$s computer facility, warehouse and processing plant, an individual must place his thumb on a biometric scanner.

YOU ARE REQUIRED TO:

$($a$)$ Briefly describe each of the components of the system of internal control as identified by ISA $315($revised $2019).(10)$

$($b$)$ Indicate to which component each of the policies, procedures or conditions listed in points $1$ to $10$ relate. $(10)$

$($c$)$ Explain the difference between an automated application control and a manual control. $(1)$

$($d$)$ Suggest four ways in which computerization $($IT$)$ benefits a company's internal control. $(4)$

$($e$)$ Provide a brief description of the three cloud services that Black $\text{'}$n Blue Ltd can use. $(2)$

Answer rating: 100% (QA)

a Brief description of each component of the system of internal control 1 Control Environment This component sets the tone at the top of the organization and includes the attitudes awareness and actio... View the full answer