Assessment task
\nACCT6003 \u2013 Assessment task 3
\nMartie\u2019s guidance -check list
\n1) Comment (Identify) and evaluate internal controls applied by the chosen company during the
\naudit procedures to identify the operating effectiveness of controls. Give two examples of internal
\ncontrols applied by the selected company.
\nPlease refer to week 8 tutorial recording
\na. Identify Internal controls
\nChapter 6 \u2013 gaining understanding of client\u2019s system of internal controls (ASA315)
\nEntity level controls
\nRefer to task 2 Part B Question 5 : strength \/weakness of 2 internal controls
\n\u2022 Control environment of your company \u2013 see chapter 6.3.1
\n\u2022 Entity risk assessment process \u2013 see chapter 6.3.2 \u2013 look in Company
\nannual report for risk assessment process, possible separate committee?
\n\u2022 IT \/ Computerised systems controls \u2013 see chapter 6.3.3
\n\u2022 Monitoring controls \u2013 see chapter 6.3.5
\no Internal audit department
\no Separate audit committee
\nTransaction Level controls
\nControl activities \u2013 see chapter 6.3.3 and
\n\u2013 Physical controls ( lock & key or security guards manual controls)
\n\u2013 Performance reviews ( manual \u2013 IT -Dependent)
\n\u2013 Segregation of incompatible duties ( IT dependent or Automated
\nApplication control)
\n\u2013 IT systems \u2013 (IT dependent or Automated general access or
\napplication(software) controls including edit, validation, interface controls
\nb. Evaluate means evaluate if the internal controls are
\n\u2022 Entity level or transaction level
\n\u2022 STONG or WEAK or NON-EXISTANT
\nExample : Look if separate internal audit committee . department \u2026 if yes, then
\nstrong controls, if doesn\u2019t exist then not weak or non-existent control
\nSee textbook ch 6.6
\n\u2022 PREVENTATITVE OR DETECTIVE -chapter 8.1.1<\/p>\n
\u2022\tMANUAL OR AUTOMATED CONTROL \u2013 Chapter 8.1.2
\nManual = Physical control- a truly IT independent like physical lock & key
\nAssignmentTutorOnline<\/p>\n
Manual = IT Dependent = Senior manager performance \/ exception\/variance report
\nreview
\nAutomated control \u2013 General access and Application controls
\nExample : Look if separate internal audit committee . department \u2026 if yes,
\nthen strong controls, if doesn\u2019t exist then not weak or non-existent control
\n2) Examine the techniques of testing controls that should be applied by the auditing firm. Given
\nan example for each technique identified.
\nRefer tutorial week 8 : Techniques of testing controls & week 9 Marties slides \u2013 revision for extra
\nexamples \u2013 DON\u2019T COPY (Enquiry, Observation, Re-Performance, Inspection for Internal
\ncontrols
\nChapter 8 \u2013 section 8.2
\nWeek 11 slide
\n3) Determine relevant substantive testing for THREE (3) accounts selected from balance
\nsheet accounts of the chosen company, such as cash, trade receivables, inventory,
\nproperty, plant and equipment (PPE), intangible assets, goodwill, investment, loan,
\npayables, provisions, leases, long-term liabilities, equity, rAssessment surplus, deferred tax
\nassets, deferred tax liabilities. You should identify the objectives, substantive tests of
\ntransactions and account balances for each account identified. Refer to relevant ASAs or
\nother resources.
\nSee tutorial slides for Week 10
\nSee chapter 10
\nIf using Inventory make sure you differentiate between manufacturer below or retailer like
\nMaggie Beer
\nEXAMPLE Question 3 : Example using Maggie Beer Holdings Ltd
\n1st Balance Sheet Account : Inventory
\nFor Maggie Beer Inventory comprises of
\n\u2013 Retail inventory (Purchased and sold at a higher selling Price)
\nBalance sheet note for Inventory : note 9 page51
\nObjectives for Auditing Inventory account balance
\nSee Textbook chapter 10.4.1 \u2013 please DON\u2019T COPY AND PAST FROM TEXTBOOK \u2026 YOU
\nMUST ONLY WRITE OUT THOSE THAT ACTUALLY APPLY TO YOUR COMPANY!!!<\/p>\n
Assertions to be
\ntested\tObjective \/ reason to test that assertion
\nExistence (E)\tInventory being an asset, it is susceptible or at risk to be overstated.
\nThis audit evidence is gathered to obtain reasonable assurance that all
\ninventory recorded in the accounting records and general ledger
\naccount OF $3 500 000 physically exists
\nInventory is perishable (cheese, milk etc) thus must still \u201cexist\u201d and be
\nsaleable to be included in the inventory valuation
\nValuation &
\naccuracy (v )\tTo test that the inventory has been valued according to the accounting
\npolicy FIFO as stated in that accounting note and that it is being valued
\nat the lower of cost and net realisable value (market value) All
\ninventory that has been damaged or is obsolete as the inventory is
\nconsumable (milk, cheese) has been written down to zero value
\nCompleteness (C )\tAll actual physical inventory ahs been recorded in the accounting
\nrecords, including purchased inventory that in in transit (on the road)
\nto Maggie Beer that has been purchased Free on Board shipping (
\nownership f inventory transfers to buyer as it is shipped because buyer
\npays for freight)
\n\u2022 If the terms are FOB shipping point, the goods in transit are
\nthe property of the buyer
\n\u2022 If the terms are FOB destination, the goods in transit are the
\nproperty of the seller
\nRight and obligation
\n(R&O)\tMaggie Beer is legal right to all inventory and is free of liens, securities,
\npledges
\nClassification (C)
\nPresentation (P)\tInventory has been properly classified as current and disclosed per the
\naccounting standards
\n(If manufacturing business, then must be classified as Raw materials,
\nWork in Progress and Finished goods)
\nObjectives for Auditing transactions related to inventory being Cost of Sales<\/p>\n
Completeness of
\nexpenses\tAll expenses related to purchase of inventory recorded in accounting
\nrecords
\nAccuracy\tExpenses (purchase of inventory recorded at correct amount
\nCut-off\tExpenses recorded in correct accounting period
\nSubstantive test of account balances \u2013 See chapter 10 \u2013 table 10.9
\n\u2013 Make sure you provide: Analytical review type test
\n\u2013 Test of detail for all the assertions( objectoves identified) to be tested as identified
\nin Objectives
\n\u2013 Remember to reference to ASA or AASB
\n\u2013 (Write your test of details and in bracket indicate which assertion is being tested,
\nremember it must be relevant to your company
\n\u2013 For Inventory \u2013 always to \u201cAttend \/ observe physical stock count & refer to ASA501
\npara 4-8
\nSubstantive Analytical Review for inventory
\ni. Perform inventory turnover ratios to assess if inventory is slow moving and enquire of
\nmanagement if inventory needs to be impaired for slow moving \/ obsolete items
\n(Valuation)
\nSubstantive test of detail for inventory ( balance)
\ni. Attend the clients physical inventory count at year end and
\ni. Evaluate managements count instructions and observe that these have been
\nfollowed ASA501.4(a)
\nii. Inspect the physical inventory whilst attending the count to ascertain existence and
\nidentifying obsolete, damaged or ageing inventory (valuation) ASA501.A6
\niii. Perform inventory test counts by
\n1. Trace from stock count sheet \/ physical inventory number of unit to the
\ngeneral ledger inventory account recorded number of units for
\ncompleteness ASA501.A7
\n2. Vouch sample of inventory items from general ledger inventory account to
\nphysical inventory on the floor for existence ASA501.
\niv. Enquire about method of inventory valuation (FIFO or Weighted average) and
\nagree to accounting policy disclosure per Inventory note IN annual report
\n(Valuation)
\nv. Trace sample of inventory physical items back to supplier invoices(FIFO) and
\nagree \/ recalculate the per unit cost price based on FIFO method of valuation
\nvi. Enquire how obsolete inventory is identified and recalculate Inventory write down
\n(impairments) valuation
\nvii. Review minute of meeting for evidence of inventory pledged or held as security
\nfor loans which can influence right or ownership of inventory (Rights and
\nobligations)
\nSubstantive test of transactions \u2013 See chapter 10 \u2013 table 10.8
\nPurchasing of Inventory (Cost of Sales)
\nTesting for Cut-off
\ni. Enquire of management if all internally generated documents are sequentially prenumbered and request last documents to be processed at year end:
\na. Last internal inventory purchase order number before year end cut-off and stock
\ncount
\nb. Last customer invoice and delivery note of inventory sold before year end.<\/p>\n
ii.\tTrace last source documents per cut-off numbers to inventory general ledger to ensure
\nfinal transactions processing in the accounting records for completeness<\/p>\n
=—–<\/p>\n
ACCT6003 \u2013 ACCT6003 \u2013 ACCT6003 \u2013 ACCT6003 \u2013 ACCT6003<\/p>\n
Martie’s advice – a check list<\/p>\n
1) Discuss (identify) and evaluate the internal controls used by the selected organization during the<\/p>\n
Audit methods are used to determine the operational efficacy of controls. Please provide two examples of internal<\/p>\n
controls used by the chosen company<\/p>\n
Please see the tutorial recording from week 8 for further information.<\/p>\n
a. Determine internal controls<\/p>\n
Chapter 6 \u2013 obtaining a grasp of the client’s internal control system (ASA315)<\/p>\n
Controls at the entity level<\/p>\n
Refer to Part B of Task 2. Question 5: What are the strengths and weaknesses of two internal controls?<\/p>\n
\u2022 Your company’s control environment – see Chapter 6.3.1<\/p>\n
\u2022 Process for assessing entity risk \u2013 see Chapter 6.3.2 \u2013 look in Company<\/p>\n
Annual risk assessment process report, maybe separate committee?<\/p>\n
\u2022 Controls for information technology and computerized systems \u2013 see Chapter 6.3.3<\/p>\n
\u2022 Controls for monitoring \u2013 see Chapter 6.3.5<\/p>\n
o Internal examination<\/p>\n","protected":false},"excerpt":{"rendered":"
Assessment task ACCT6003 \u2013 Assessment task 3 Martie\u2019s guidance -check list 1) Comment (Identify) and evaluate internal controls applied by the chosen company during the\u2026<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8819,8823,8821,8818,8080,8079,8817,8816,8824,8820,8822],"tags":[3959,7839,7838,7841,630,7840,6,435,2447,2776,7842,7843],"class_list":["post-98789","post","type-post","status-publish","format-standard","hentry","category-best-master-thesis-writing-service","category-best-thesis-writing-services","category-cheap-thesis-writing-services","category-master-thesis-help","category-master-thesis-writing-service","category-online-thesis-writing-services","category-thesis-help-online-free","category-thesis-writing-help-online","category-thesis-writing-services-cost","category-thesis-writing-services-near-me","category-thesis-writing-services-reviews","tag-best-dissertation-writing-service-uk","tag-best-essay-writing-services","tag-best-thesis-writing-services","tag-cheap-custom-essay-writing-service","tag-college-paper-writing-service","tag-custom-essay-writing-services","tag-medical-research-paper-writing-service","tag-professional-thesis-writing-service","tag-research-paper-writer-online","tag-research-paper-writing-service-free","tag-thesis-writing-service-online","tag-thesis-writing-service-uk"],"_links":{"self":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts\/98789","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/comments?post=98789"}],"version-history":[{"count":0,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts\/98789\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/media?parent=98789"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/categories?post=98789"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/tags?post=98789"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}