A.)Identify any weaknesses in the internal controls described. Discuss the implications of each weakness you identify. - The computer automatically generates the purchase of the raw material when raw material falls below 70% of previous month’s usage. Someone one should physically double check the raw materials quantity before ordering as there could be some human error involved in putting the data in. Also the assumption here is that last month’s sale would be similar to the current month other factors should be involved when ordering. -Store staff has the password access for the raw materials ordered as well as finished goods. There should be a segregation of departments/authority for ordered and receiving finished good as this could lead to fraudulent scenarios. -Production Controller can make changes to the master file for both the raw materials inventory and finished goods inventory. There should be a segregation of duties as the production controller can to fraudulent activity.
B.)Assume your computer information system audit division is to perform testings of controls for the inventory systems described. Identify the key controls that you would recommend for testing. Substantive tests are the procedures by which auditors gather this evidential matter . the nature, extent, and timing of substantive tests is a matter of professional judgment, effective client internal control is a positive influence. Accordingly, the auditor may decide to decrease the amount of substantive testing, omit certain procedures, and/or schedule interim testing. Test for these Control are designed to provide evidence about the operating effectiveness of various aspect of internal control. Tests of control provide evidence to support control risk assessment below the maximum. The existence of inventory, the nature of auditor's evidence would include significant test of controls (testing of effectiveness of the client's perpetual inventory system) as well as some limited...
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