While you were involved in the audit of your client White Cross(Pty) Ltd, the following policies, procedures and conditionsexist:
1. There is strong segregation of duties in the inventory cyclebetween receiving inventory, its custody, the issue of inventoryand the recording of all movement in the inventory records.
2. The board of directors and senior management meet every sixmonths to identify the challenges facing the company and howsuccessfully they are being addressed.
3. The companyâs organizational structure is designed in such a wayas to provide the board with a realistic chance of achieving itsobjectives on an ongoing basis.
4. The human resource department goes to great lengths to definethe skills necessary for each job category and to recruit suitablepersonnel.
5. The financial director meets frequently with the financialaccountant to ensure that information required to be disclosed byIFRS is properly accumulated, recorded and processed.
6. Access to the companyâs network is controlled by the use ofcomprehensive logical controls, eg: user IDSâs, user profiles,passwords, and is granted on a need to know basis.
7. The recording in the general ledger of sales, purchases, etc,processed by the computer is achieved by passing journal entries.All journal entries are scrutinized and authorized by 2 seniorfinancial accounting department employees.
8. All transactions keyed into the computer via terminals aresubject to a wide range of input controls.
9. The internal audit department conducts frequent reviews ofbreakdowns in internal control and how these are corrected.
10. To enter White Cross (Pty) Ltdâs computer facility, warehouseand processing plant, an individual must place his thumb on abiometric scanner.
YOU ARE REQUIRED TO:
a) Briefly describe each of the components of internal control.(10)
b) Indicate to which component each of the policies, procedures orconditions listed in
points 1-10 relate. (10)
c) Explain the difference between an automated control and a manualcontrol (1)
d) Suggest four ways in which computerization (IT) benefits acompanyâs internal control. (4)
While you were involved in the audit of your client White Cross(Pty) Ltd, the following policies, procedures and conditionsexist:
1. There is strong segregation of duties in the inventory cyclebetween receiving inventory, its custody, the issue of inventoryand the recording of all movement in the inventory records.
2. The board of directors and senior management meet every sixmonths to identify the challenges facing the company and howsuccessfully they are being addressed.
3. The companyâs organizational structure is designed in such a wayas to provide the board with a realistic chance of achieving itsobjectives on an ongoing basis.
4. The human resource department goes to great lengths to definethe skills necessary for each job category and to recruit suitablepersonnel.
5. The financial director meets frequently with the financialaccountant to ensure that information required to be disclosed byIFRS is properly accumulated, recorded and processed.
6. Access to the companyâs network is controlled by the use ofcomprehensive logical controls, eg: user IDSâs, user profiles,passwords, and is granted on a need to know basis.
7. The recording in the general ledger of sales, purchases, etc,processed by the computer is achieved by passing journal entries.All journal entries are scrutinized and authorized by 2 seniorfinancial accounting department employees.
8. All transactions keyed into the computer via terminals aresubject to a wide range of input controls.
9. The internal audit department conducts frequent reviews ofbreakdowns in internal control and how these are corrected.
10. To enter White Cross (Pty) Ltdâs computer facility, warehouseand processing plant, an individual must place his thumb on abiometric scanner.
YOU ARE REQUIRED TO:
a) Briefly describe each of the components of internal control.(10)
b) Indicate to which component each of the policies, procedures orconditions listed in
points 1-10 relate. (10)
c) Explain the difference between an automated control and a manualcontrol (1)
d) Suggest four ways in which computerization (IT) benefits acompanyâs internal control. (4)
