(a) Identify the key assertion at risk for payables in relation to payments made prior to receipt of goods.
(b) For the control procedures (1) to (5) above for payables:
i. Identify the key preventative internal control that directly addresses the risk of payments being made by Shady Oaks to its suppliers before the goods are received.
ii. Outline how your choice of the internal control in (i) will prevent payment to suppliers prior to receipt of goods.
iii. Design and describe in detail an appropriate test of control that you would use to satisfy yourself about the effectiveness of this internal control.

Chan & Partners Chartered Accountants is a successful mid-tier accounting firm with a large range of clients across Australia. During the 2017 year, Chan and Partners gained a new client, Medical Services Holdings Group (MSHG), which owns 100 per cent of the following entities:

• Shady Oaks Hospital, a private hospital group • Gardens Nursing Home Pty Ltd, a private nursing home

• Total Cancer Specialists Limited (TCSL), a private oncology clinic that specialises in the treatment of cancer.

Year-end for all MSHG entities is 30 June.

You are an audit senior on the Shady Oaks Hospital engagement. Your initial review of the business has highlighted the following significant risks.

1. Payroll expense. Shady Oaks employs, in addition to its full-time staff, a significant number of casual nursing, cleaning and administrative staff. Overtime is often worked on weekends and night shifts due to a shortage of staff. Payment at overtime rates for standard weekend and night shifts has been a common occurrence.

2. Accounts payable. Shady Oaks also has a large number of suppliers for various medical supplies and drugs. Paying the supplier twice for the same purchase has been a continuing problem.