Case Study Part 3

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10-45

PINNACLE MANUFACTURING - Part III
Control Risk Matrix – Acquisitions

Transaction-Related
Audit Objective

Internal
Controls*
Recorded acquisitions are for goods and services received (occurrence). Existing acquisition trans-
actions are recorded (complete-ness).
Recorded acquisition transactions are stated at the correct amounts (accuracy). Recorded acquisition transactions are properly included in the master files, and are properly summarized (posting and summarization). Acquisition transactions are properly classified (classification). Acquisition transactions are recorded on the correct dates (timing).

1.Required use of PO and complete verification
C

2.Proper approval

C

C

3.Segregatin of functions
3.
C

4.Cancellation of documents

C

5.Prenumbering of documents for accounting sequences

C

6.Internal verification of documents
C

C

C

C

C

7.Chart accounts

C

8.Processing for procedures

C

9.Monthly reconciliation of Accounts Payable Master file with the general ledger

C
Deficiencies*
1.

2.

3.

Assessed control risk
Low
Low
Low
Low
Low
Low

* Note: This is a standard form to be used by students. There aren't necessarily 9 controls and 3 deficiencies in the case.
10-45

PINNACLE MANUFACTURING - Part III
Control Matrix – Cash Disbursements

Transaction-Related
Audit Objectives

Internal
Controls*
Recorded cash disbursements are for goods and services actually received (occurrence). Existing cash disbursement transactions are recorded (complete- ness).
Recorded cash disbursement transactions are stated at the correct amounts (accuracy). Recorded cash disbursement transactions are properly included in the master file, and are properly summarized (posting and summarization). Cash disbursement transactions are properly classified (classification). Cash disbursement transactions are recorded on the correct dates (timing).

1. Segregation of functions

C

2. Review of checks signed by authorized individuals
C

3. Pre-numbered checks signed and accounted for

C

4. Use of Chart accounts

C

5. Prompt recording procedures

C

6. Monthly reconciliation of Account payable with general ledger

C

7.

8.

9.

Deficiencies*
1. Independent Bank reconciliation not done

D

D

2. Verifications not made on cash disbursement files
D
D
D

3. Verifications not made on documentation of cash disbursements

D

D

D

Assessed control risk*
Medium
Medium
High
Low
Low
Low

* Note: This is a standard form to be used by students. There aren't necessarily 9 controls and 3 deficiencies in the case.
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