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Internal controls 1 through 5 were tested in prior audits. Evaluate each internal control

Internal controls 1 through 5 were tested in prior audits. Evaluate each internal control

Internal controls 1 through 5 were tested in prior audits. Evaluate

each internal control independently and determine which controls must be tested in the

current year's audit of the December 31, 2016, financial statements. Be sure to explain

why testing is or is not required in the current year.

 

1. The general ledger accounting software system automatically reconciles totals in each

of the subsidiary master files for accounts receivable, accounts payable, and inventory

accounts to the respective general ledger accounts. This control was most recently

tested in the prior year. No changes to the software have been made since testing and

there are effective controls over IT security and software program changes.

 

2. The accounts payable clerk matches vendor invoices with related purchase orders

and receiving reports and investigates any differences noted. This control was tested

in the 2015 fiscal year-end audit. No changes to this control or personnel involved

have occurred since testing was performed.

 

3. The sales system automatically determines whether a customer's purchase order and

related accounts receivable balance are within the customer's credit limit. The risk of

shipping goods to customers who exceed their credit limit is deemed to be a significant

risk. This control was last tested in the December 31, 2014, financial statement audit.

 

4.The perpetual inventory system automatically extends the unit price times quantity

for inventory on hand. This control was last tested in the audit of December

31,2014, financial statements. During 2016, the client made changes to this software

system.

 

5. The client's purchase accounting system was acquired from a reputable software

vendor several years ago. This system contains numerous automated controls. The

auditor tested those controls most recently in the 2015 audit. No changes have been

made to any of these controls since testing and the client's controls over IT security

and software program changes are excellent.

Tripti 06-Dec-2019

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