Discount Tools purchase transactions are initiated when the purchasing department clerk reviews the inventory file for items that need to be replenished. The clerk selects a vendor, adds a record to the digital PO File, and prints four hard copies of the purchase order. One copy is filed in the department; the second copy is sent to the receiving department; the third copy is sent to the accounts payable department; and the final copy is sent to the vendor. When the goods and the packing slip arrive at the receiving department, the receiving clerk examines the items for condition and verifies the quantities received against the packing slip. Upon completion of the inspection, the clerk manually creates two hard copies of a receiving report. One copy is filed in the department and the second accompanies the goods to the warehouse. In the warehouse, the clerk receives and shelves the goods. In addition, the clerk updates the inventory file by posting the amounts received to the various inventory records affected. When the accounts payable department clerk receives the invoice from the supplier, he visually matches it to the hard copy purchase order on file. The clerk then adds a record to the vendor invoice file, which serves as the AP subsidiary ledger and sets a due date for payment. Finally, at the end of each day, the warehouse clerk and the AP clerk create digital journal vouchers to reflect the days transactions. The system automatically posts the journal vouchers to the relevant GL control accounts.

A. Analyze the physical internal control weaknesses in the system

B. Describe the IT controls that should be in place in this system

C. What financial statement misrepresentations may result from the control weaknesses?

D. Describe the substantive tests that an auditor would perform to identify material misrepresentations.