You are the audit senior on audit engagement. You are asked to review the company's

Accounting processes and comment on the effectiveness of internal controls. The following is an excerpt from the audit working paper files prepared by the audit staff

A finance company derives a large volume of mail to process, which contains cheque, money orders, and customer correspondence. An account associate opens the mall, sorts the contents into payments or correspondence, and then prepares a payment listing, the account associate then takes the cheques to the bank for deposit, but the payment listing is given to a separate person to enter into the computer.

All cheques for purchases over $15,000 must be approved by 2 supervisory personnel. Given the small size of the office, this includes only the manager, the assistant manager, and the accountant. This restricts the number of signees who may be on vacation at any time and creates a problem when one or especially, two of these people are away from the office on a business trip. To alleviate this problem, all authorized signers have an electronic signature and sign the cheques manually


 

REQUIRED: (10 marks total)

For the above situation

(i). Identify two control weaknesses (1 mark each)

(ii). For each control weakness identified in (i) explain the implications of the control weakness on the company's financial statement (2 marks each)

(iii). For each control weakness identified in (i) provide a recommendation to remedy the control weakness (2 marks each)

Answer rating: 100% (QA)

i Two control weaknesses in the given situation 1 Lack of segregation of duties The account associate who opens the mail sorts the contents and prepar... View the full answer