Internal Relation Case: Internal Control Case

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INTERNAL CONTROL CASE Done by: Amna Abdumajid AlSaffar H00226903 Section 1 Question 1: For each sales transaction related audit objective identify the existing controls. Sales and collection cycle in a business begins when a customer purchases goods or services and ends when the company receives payment for the purchase. It is important to test sales transactions and internal controls of those transactions to ensure that the company is not misstating its revenues or accounts receivable. (Mohr, 2015) Sales transactions-related audit objectives are occurrence, completeness, accuracy, posting and summarizing, classification and timing. 1. Occurrence: recorded transactions exist. 2. Completeness: existing transactions are recorded. 3. Accuracy:…show more content…
Firstly, bank reconciliation are prepared monthly. As it is mentioned in the case, Khalid, prepares monthly bank reconciliations and reconciles the general ledger to the aged accounts receivable trial balance. Secondly, the actual cash receipts is deposited on a daily basis. As it is mentioned in the case, the cash is deposited in the bank the next morning by Diab. • Posting and summarizing: There are some controls where the Cotton Company was following the posting and summarizing objective of cash receipt transaction. Firstly, cash receipts journal is prepared. According to the case, the computer system automatically totals the journals and posts the totals to the general ledger. Secondly, accounts receivables ledger is reconciled by someone who is responsible of sales and cash receipts. According to the case Khalid is the one who is responsible of reconciling the general ledger to the aged accounts receivable trial balance. Question 3: What are some possible deficiencies in the Store System? How would you as the auditor suggest ways to improve the…show more content…
It is important to have a separation of duties to ensure that duties are assigned to individuals in a way that ensures that no one can control both the recording function and the procedures related to processing the transaction. • Physical control over assets and records: There should be more physical controls of assets and records to help protect the company's assets. Physical assets are the most type of protective measure for safeguarding assets and records is the use of physical precautions. Physical controls safeguard assets and enhance the accuracy of the accounting records. Examples of these controls are safes, vaults, and safety deposit boxes for cash and business papers, and storage cabinets for records. • Monitoring Activities: There should be more monitoring activities that assess the quality of performance and determines whether controls are effective. For monitoring to be effective, employees need to understand the mission, objectives, and risk tolerance levels of the organization. References: Loughran, M. (2015). How to Identify the Five Components of Internal Controls. Retrieved from Dummies:

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