As part of audit planning, the audit team needs to obtain and understanding of the company's system of internal control. Peter, the audit junior, is unsure what a company's internal control comprises.Which of the following is NOT a component of an entity's internal control?
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1 .The audit manager has noted in the detailed audit plan that EuKaRe's control environment may be weak.Which TWO of the following statements are valid reasons as to why EuKaRe may have a weak control environment?
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2 .Which of the following statements are valid recommendations with regards to improving the internal controls for goods received described above?(1) The ordering department should match orders to GRNs and mark orders as closed once all goods have been received, to enable any outstanding orders to be chased up.(2) The first copy of the GRN should be sent directly to the accounts department, without first going through the ordering department, to prevent delays in recording the purchase.(3) The goods inwards department should review the goods for their condition, in order to identify and return any damaged goods.(4) GRNs should be filed in date order or by purchase order number, instead of by the supplier's reference number, to ensure that they can be matched easily to orders.
A 1 and 3 B 1, 2 and 3 C 1, 2 and 4 D 1, 3 and 4
3 .As part of your audit of the procurement system, you have recommended that the goods inwards department should ensure that the goods received are valid business purchases, by matching all deliveries to an authorised order form before issuing a GRNWhich of the following would be an appropriate test of control to confirm that the control is operating effectively?
A For a sample of orders, check that there is a matching goods received note B Check that the numerical sequence of purchase orders is complete C For a sample of goods received notes check that there is an authorised purchase order D Check that the numerical sequence of goods received notes is compl...
4 .KLE Co's management is keen to increase the range of assignments that the company's internal audit undertake.Which of the following assignments could the internal audit department be asked to perform by management?
A Undertake 'mystery shopper' reviews, where they enter the store as a customer, purchase goods and rate the overall shopping experience B Assist the external auditors by requesting bank confirmation letters C Provide advice on the implementation of a new payroll package for the payroll department D...
5 .Which of the following best summarises the meaning of 'efficiency' in the context of a Value for Money audit as requested by KLE Co's management?
A The lowest cost at which the appropriate quantity and quality of physical, human and financial resources can be achieved B Producing the required goods and services in the shortest time possible C The extent to which an activity is achieving its policy objectives D The relationship between goods a...
7 .Which of the following are the most likely consequences of the internal control deficiency described in the requisition system for raw materials?(1) Fraudulent purchases may be made, leading to funds being diverted to third parties for illegal purposes(2) Stock-outs may occur, resulting in the company being unable to meet orders and lost revenue(3) Unnecessary purchases may be made, resulting in excess obsolescent raw materials accumulating in inventory requiring to be written down(4) Raw materials of poor quality may be purchased, resulting in low-quality products being produced, customer goodwill being lost and going concern risks
A 1 and 3 B 2 and 3 C 1 and 4 D 2 and 4
8 .While reviewing Cherry's purchases cycle, you identified that goods received notes for raw material purchases are not sequentially numbered.Which of the following areas would you consider to be most at risk of material misstatement, as a result of this internal control deficiency?
A Rights and obligations of inventory B Valuation of payables C Existence of inventory D Completeness of payables
9 .You now need to gain an understanding of Cherry's non-current assets cycle.Which of the following statements is correct regarding audit procedures concerning the non-current asset cycle?
A The same ordering documentation may be used in the non-current assets cycle as in the purchases cycle. If this is the case, it will not be necessary to document the non-current assets cycle. B Because there are likely to be less capital purchases than standard purchases in the year, it may not be ...
10 .Cherry's internal audit department has provided you with details of the internal controls around the noncurrent assets cycle. The controls include the following:On receipt, each asset is assigned a unique serial number and this is recorded on the asset and in the non-current assets register.Which TWO of the following describe the MOST RELIABLE audit procedures which enable the auditor to assess whether this control is operating effectively?(1) Select a sample of capital additions on site, agree that a serial number is recorded on the asset and confirm it is included in the non-current assets register(2) Select a sample of assets recorded on the non-current assets register, confirm that it includes a serial number for each asset and agree the number to the physical asset(3) Inspect the non-current asset register and verify that there are no duplicated serial numbers(4) Observe the receipt of assets to confirm that serial numbers are assigned and recorded
A 1 and 3 B 2 and 3 C 1 and 4 D 2 and 4
