Question
For each of the following independent cases, state the highest level of deficiency that you believe the circumstances representa control deficiency, a significant deficiency, or
For each of the following independent cases, state the highest level of deficiency that you believe the circumstances representa control deficiency, a significant deficiency, or a mate- rial weakness. Explain your decision in each case.
The company processes a significant number of routine intercompany transactions. Individual intercompany transactions are not material and primarily relate to balance sheet activityfor example, cash transfers between business units to finance normal operations. A formal man- agement policy requires monthly reconciliation of intercompany accounts and confirmation of balances between business units. However, there is not a process in place to ensure performance of these procedures. As a result, detailed reconciliations of intercompany accounts are not performed on a timely basis. Management does perform monthly procedures to investigate selected large-dollar intercompany account differences. In addition, management prepares a detailed monthly variance analysis of operating expenses to assess their reasonableness.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started