Auditing Using Controls to Protect Information Assets - Assignment Example

Chapter 4: Question 4.34; importance of using the work of an expert in auditing RPL Using the work of an expert is important for an auditor since, it helps in providing accurate results. IN Auditing RPL, we will employ the work of an expert to appraise the value of depreciation due to change in rate of depreciation and its useful life. The work of an expert is important in appraising the value of an intangible asset which is imminent from the acquisition of MBL limited. An inherent risk is conseq8ientrial from impairment of copyright of the medical journal books (Chris Davis 2011). Chapter 5: Question 5.30; what to be entailed in the engagement letter Communication with outgoing practitioner I will communicate with the outgoing audit in order to get the first hand information as to the reason for their resignation as well as identify if auditors independence was not guaranteed. The internal Auditor’s work In forming an audit opinion, an audit will employ as well as cooperate with internal audit 0of RPL. I will therefore appraise their competence as well as ascertain the internal control in order to ensure that placing reliance on the work on internal audit will not be misleading (Graham J. Hooley 2008). Chapter 6: Question 6.28; the inherent risk factors that arise from the nature of RPL’s business operations: Effect of foreign currency translation It can be observed that RPL purchases 50% of its inventory globally with reimbursement being made in the currency in which goods were bought from. This depict an inherent risk since, the effect of currency translation and exchange rate must be accounted for at the time purchases occurs as well as lead to effect on the account payables as well as the inventory and the balance will be misleading since, the cash balance will be incorrect (Gupta 2012). Acquirement of MBL The acquisition of MDL leads to transformation in the business structure for RPL. While the intangible asset such as the copyright for the medical books will experience impairment and hence depict an inherent risk Chapter 7: Question 7.28; A. Six control activities: Control Activities Nature of control The account makes the daily reconciliation of bank balances Manual control The segregation of duties between the debtors and the cash daily banking. Manual control The value posted in the account payable is accounted for by cashier Manual control The corroboration and singing of invoices is approved by account receivable clerk. Manual control There is an automation in accounting system in order to ensure that the order processing do not go beyond the credit terms and limits. IT Application control The digital Library mechanically backup the tapes and stored elsewhere. IT general control B. Two key internal control weaknesses An update of account receivable as well as the general ledger by Rebecca depicts some errors since; she isn’t well conversant with order (Henning Kagermann 2007). Also, the calculation of account payables as well as inventory is done by Kirby who is the account payable clerk. The growth in consequence of errors as well as weakness in internal control will be observed as a result. C. Account balances at risk The sales and account receivables was bestowed on Rebecca and Bob Watkins. The data entry wasn’t corroborated by any other assigned person. As a result, there are high chances that errors will be experienced since data are manually entered into the system. The account payables as well as the inventory data entry are done by Clerk Kirby manually. With presence of numerous transaction, there is high chance that inaccuracy y in data entry will be experienced (Moeller 2010). D. Assertion at risk The risk in inventory and account payables would lead to risk in allotment as well as appraisal assertion. Where the account receivable and turnover balances are incorrect, the assertion of existence, occurrence as well as subsequent event will be misleading Chapter 8: Question 8.27 Appropriate audit procedure for testing the control Control Test of control Checking its unreliability Segregation of duties in account payable and cash Ensuring that the cash management as well as the account payables duties are separated Accounts receivable clerk is authorized to enter cash proceeds into the system Exceeding the credit limit would command an approval from the respective department Ensuring that the those goods surpassing the credit limits as well the corroborating the transaction statement to be certain of the approved transaction Presence of non reliable controls leads to lack of evidence in transaction statement The confirmation of correctness of the invoices and singing is done by the payable clerk Checking on the selected invoices and corroborating their correctness Presence of weak internal control will lead to lack of evidence in term of completeness test Automatic checking and controlling of order processing is done by the system with client with exceeded credit limit Appreciate the customers with panned credit limits and terms of credit. Weak internal controls in this part will lead to non reliance of their control test. The daily bank reconciliation of the account payables and the daily banking is done by the account clerk Selecting the reconciliation sample done and corroborating where they are correctly done Weak internal l control in this area would lead to poor reconciling and non reliance of the bank and payable balances The bank recompilation is done on a monthly basis by the account assistant Choosing the sample of monthly reconciliation as well as confirming for completeness as well s correctness of the bank balances There might exist some errors in bank reconciliation in some month C. The appropriateness of the audit confirmation pretentious by William’s request. An audit test for the year ending July 2015 will be significant as per the instruction from William. It is apparent that it goes beyond the time limit for the audit. As results the audit evidenced gathered will be appropriate in forming an audit opinion. The internal controls will be checked frequently so as to be certain that the test controls are working. The request from William affect the sufficiency of the audit evidence due to the fact that the audit test for the year ending June 2015 and the Audit deadline of August 2015 will not allow anytime to execute other audit test. More audit evidence specifically on account payables will be non-dependable because of inefficiency of the control test as a results, an audit trail and detailed auditing on account receivables will be appropriate for the auditing (International Federation of Accountants 2007). D. Any control variations that might be exposed by the tests of controls The January bank recompilation depict some variations which is non-reconcilable The invoice number 15326 is misleading and invoice number 15768 as some errors in extension calculation from the total value of the daily magazine The invoice number 17524 isn’t singed as an evidence of the correctness of pricing. Chapter 9: Question 9.34 How generalized audit software could be used to test sales cut-off at year end The cut off test will be examined the by the generalized audit software by processing the listing for the 2016 sales at closing date of 30th and 28th June. This will be significant in appraising the soundness of the controls on sales and also checking presence of any material misstatement in sales (Moeller 2010). A copy of the minutes of the group meetings Date (January 2016) Members Matters conversed Assigned duties 2nd A B C Introduction of team members synopsis of goals for auditing Appraising the internal controls 5th A B C Appraising the companies cash and budget estimates Examining the annual report for RPL for the year ending 2015 Inventory assessment 7th A B C cross-examination of the importance and correctness of the budget duties assigned to every team members The outcome of the test is submitted to the team embers Peer review forms In order to ensure that the information gathered by team members is sufficient and reliable, a peer review was conducted which entailed cross extermination of every team members work. And the following were member’s opinion. Team Member A The formulation of the budget estimates commands the precise accounting standards as a far as accounting standards is concerned. This is important budget forms the basic part of the company survival and thus an appropriate forecast with accuracy is appropriate in order to ensure that there is small variance between the actual and budgeted figures Team Member B The duties assigned to member C was examined by member B and he pointed out that the company’s internal controls was effective with some test on controls being tested prior placing reliance eon the work of an internal auditor Team Member C The meme was not convinced by work done by member B and he summarized that the member actually needed some help in recognizing more challenges in the financial statement since, the assigned duty to member B was somehow challenging and demanding and thus would command the combine force in order to ensure that the correct information is provided for audit decision making. Reference list Chris Davis, ‎S‎W 2011, IT Auditing Using Controls to Protect Information Assets, Springer , Sydney. Graham J. Hooley, ‎P‎N 2008, Marketing Strategy and Competitive Positioning, London. Gupta 2012, Contemporary Auditing - Page 1189, Cingage Learning , New York. Henning Kagermann, ‎K‎K 2007, Internal Audit Handbook: Management with the SAP®-Audit, Springer , Sydney. International Federation of Accountants 2007, Handbook of International Auditing, Assurance, and Ethics, Jogn Wiley, London. Moeller, RR 2010, IT Audit, Control, and Security, Cingage Learning , New York. Renaud, L 2007, The influence of label on wine consumption : its effects on young consumers’ perception of authenticity and purchasing behavior, Bologna, Italy. Sandra Senft, ‎G 2010, Information Technology Control and Audit, Third Edition, Cingage Learning , New York. Sandra Senft, ‎G‎D 2012, Information Technology Control and Audit, Fourth Edition, Jonh Wiley, London. Read More