B.

Cases study: testing of bank reconciliation controls

You have a new client "XYZ Ltd" operating in a retail industry. You are testing the quality of the firm's

controlling systems on its bank accounts. After you interview the bank's management, you find that

both the staff members performing the bank reconciliations and the supervisor have taken a long

leave. In addition, you also find no evidence that bank reconciliations have been used to detect and

amend the company's reports.

Required:

B.1. Explain the aim of the control tests on the client.

B.2. Explain the impacts of the staff leave in the quality of the controlling systems.

B.3. What is your audit strategy on your sustentative tests on the client's cash balance during substantive tests?