[sadkins415]

I have tried answering some of these but I'm not sure if they are correct. Can someone please help mem with this. Thank you so much!


(Tests of Controls) If a company’s control risk is low, the auditor needs to gather
Evidence on the operating effectiveness of the controls.
Required

a. For each of the following control activities, indicate the audit procedure the
Auditor would use to determine its operating effectiveness.

b. Briefly indicate the audit implication; that is, how would direct tests of account
Balances need to be modified if the auditor finds that the control procedure is
Not working as planned?

Controls:
1. Credit approval by the credit department is required before salespersons accept
Orders of more than $5,000 and for all customers who have a past-due
Balance higher than $3,000. Authorization-determine whether the approval has been granted and documented.

2. All merchandise receipts are recorded on prenumbered receiving slips. The
Controller’s department periodically accounts for the numerical sequence of
The receiving slips. Requires all receiving reports that are accounted for to be pre-numbered to ensure all items are recorded.

3. Payments for goods received are made only by the accounts payable department
On receipt of a vendor invoice, which is then matched for prices and
Quantities with approved purchase orders and receiving slips. Proper Recognition of the Liability for the receipts of goods and services

4. The accounts receivable bookkeeper is not allowed to issue credit memos or
To approve the write-off of accounts.

5. Cash receipts are opened by a mail clerk, who prepares remittances to send
To accounts receivable for recording. The clerk prepares a daily deposit slip,
Which is sent to the controller. Deposits are made daily by the controller.
Segregation of Duties

6. Employees are added to the payroll master file by the payroll department only
After receiving a written authorization from the personnel department. Determine whether authorization has been granted

7. The only individuals who have access to the payroll master file are the payroll
Department head and the payroll clerk responsible for maintaining the
Payroll file. Access to the file is controlled by computer passwords. Physical controls to safeguard assets

8. Edit tests built into the computerized payroll program prohibit the processing
Of weekly payroll hours in excess of 55, and the payment to an employee
For more than three different job classifications during a one-week period.

9. Credit memos are issued to customers only on the receipt of merchandise or
The approval of the sales department for adjustments.

10. A salesperson cannot approve sales return or price adjustment that exceeds 5
Percent of the cumulative sales for the year for any one customer.The divisional
Sales manager must approve any subsequent approvals of adjustments
For such a customer.