- This topic has 2 replies, 3 voices, and was last updated 2 years ago by AshleyMarc1997.
August 8, 2020 at 1:58 pm #579637John1998m
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I’m new here & I am looking to get an answer from a tutor on control and test of controls. Here my trick that I do to find controls first and let see whether you agree with what I am doing is good.
First I identify at the deficiency in the internal control that then I ask & think as a [management] to find the right control that should be placed; and for that right control I specifically look at the control activities of the internal controls compenent (5 compenents) such as (authorisation, reconciliation, physical controls, segregation of duties, comparsion etc)
1). For example, If there is a deficiency in the “customer credit limits which are set by sales ledger clerks”,
so my answer goes like this “credit limits should be set by a senior member of the sales department and not by sales ledger clerks. These limits should be [authorised=control activities] by the senior member and the signature is to be duly signed” (Remeber control activities to construct your answer according to that) – [Is this correct strategy?]
When I’m done with the control, now lets go to the test of controls.
2). For test of control, first I identify audit procedure [Inspect, Observe, Enquiry, Reperform], then I put the reason why it is being placed such as “[Inspect] a sample of new customers list accepted in the year and [enquire] from management as to the authorisation of the credit limit to ensure that it was was audthorised by a senior official”. [Is this correct strategy?]
I need a comment or advice by a professional tutor whether this is the right strategy to construct my answers for control & test of controls questions? And what do you think in your opinion if there any other way that I can think of which is the most effective? [I mean how do I think different for this control Q’s?]August 9, 2020 at 8:18 am #579686Kim SmithKeymaster
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Welcome to my AA forum John.
Yes you are thinking about this in the right way – controls (including control activities) are what management should be putting in place so this can be thought about “wearing management’s hat” and tests of controls are performed by the auditor to conclude on their operating effectiveness so must be considered “wearing auditor’s hat”.
You may find my comments on this recent post useful also https://opentuition.com/topic/understanding-test-of-control-substantive-procedure/August 9, 2020 at 8:54 am #579692AshleyMarc1997
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Thank you @Kim Smith 🙂 thats such a relief getting to know your side!
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