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Dear Sir,
Could you please provide me some guidance on how to do “Test of Control” question because i really don’t understand from where to begin my answer. I understand everything but when i begin my answer i don’t know where to start and how to test the controls.
Same goes for deficiency questions.
Your guidance on this will be much appreciated.
Thanks,
Bot these questions are driven by information in the scenario.
If there are controls set out eg authorisation, reconciliations, physical controls, segregation of duties, then these are what have to be tested. So if you are told that a manager always approves overtime payments, you need to make sure that this control is operating eg by looking at time sheets signed by the manager as authorisation.
Deficiencies are a little harder. Think “What could go wrong?” Eg an arithmetic error, a document lost, a document processed twice, a single person having too much control over a transaction. If there seems to be a gap in control, there probably is.
The OT lectures and notes for Chapter 13 in the OpenTuition material go trough the types of control you would expect in the major accounting systems.
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