Answer Happy

Audit Practice Set Part 2: Control Testing
Instructions:
Respond to each question with complete sentences and reasoning
to support your answer. Cite
sources.
Part A: You have documented your understanding
of GPC’s internal controls and your preliminary assessment that
control risk is “low”. You are about to begin testing the
controls. Consider each of the following controls.
Indicate the anticipated results (what you would expect to find if
the control is functioning properly) and the potential problem
which could exist if the control is not functioning properly.
#
Control
What is the auditor looking for? (What does the
auditor expect to see assuming effective controls?)
What problems could occur if the control is not
effective?
1
Verify the pricing of an invoice against an approved
pricing list
2
Trace the amount of the remittance to the validated bank
deposit slip filed in the office of the assistant to the
president
3
Verify that customer credit has been
approved.
4
Cash deposits are made daily
Part B: Think about errors and fraud that could
occur and/or fail to be detected due to the following
weakness. Complete the table to communicate the potential
problem.
#
Internal Control Deficiency
What error(s) or fraud may not be prevented or detected
due to the internal control deficiency?
1
Sales invoices are prepared and mailed prior to delivery
of the goods.
2
Accounts receivable are not written off on a regular
basis.