Case 4

Topics: Auditing, Internal audit, Internal control Pages: 4 (931 words) Published: June 1, 2015

Case #4

Jiawei Qi

Principle of audit and control (43010)
Professor Ben Hoffman
February 23, 2015

TO: Charles ward, CPA Partner
FROM: Jiawei Qi
DATE: February 23, 2016
SUBJECT: Assess control risk and plan tests of controls and substantive tests of transactions

The purpose of the memo is to communicate to you the outcome of the company’s control risk, the test of controls and substantive tests of transactions.

General procedure:
First, we assess the level of control in Oceanview Marine Company’s control environment (W/P10-8). We can see through the control environment questionnaire (W/P10-1~W/P10-7) that the general level of control for Oceanview Marine Company is effective. It has nine efficient levels of control and three inefficient ones including internal audit, external influences and IT department. Obviously, since it’s a small company, it doesn’t necessarily require the internal audit department. We then understand the client’s internal controls using the acquisitions flowchart and related internal control questionnaire (W/P10-1~W/P10-7). There’re eight efficient controls and two inefficient controls. Both inefficient controls are about timing. We believe that the preliminary assessment of control risk is less than the maximum level. So we make preliminary assessment of control risk through the information we get through understanding of flowcharts and questionnaires. The result is shown in W/P 13-4. The overall control risk is low, while there is no control in timing and classification object. Finally, we plan the tests of controls with methods of examining, testing and requiring and substantive tests of transactions for acquisitions such as vouching, tracing bills, making examples and footing the journal entries as is shown in W/P 14-1&2. Finish the work.

Control environment summary:
The general level of control is high. However, the client doesn’t...
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