It is July 2019. You are an audit supervisor with Rocky & Co, reviewing extracts from the internal controls documentation in preparation for the interim audit of Ping Co. The companys year end is 30 September 2019. The company provides training services for individuals looking to become qualified engineers. Ping Cos customers are the employers that send their employees for training on a weekly basis. Ping Co runs classes in its 30 training centres across the country.The company has a small internal audit (IA) department, which has experienced significant staff shortages and is currently under-resourced. This has resulted in a reduction in their programme of work for the year in many areas.Non-current assets Ping Cos training centres are either owned by the company or are held under a long-term lease.The company also has a head office and central warehouse for storage of training materials.Each training centre is set up as a separate department and is given an annual capital expenditure budget but some departments have already significantly exceeded their annual budgets.When new equipment is acquired the finance department classifies the expenditure between capital and revenue, noting the classification on the purchase order. The classification is made with reference to guidelines established by the finance director, who sample checks that the capital or revenue expenditure allocation has been correctly applied.Part of the work which Ping Cos IA department is required to carry out is a comparison of the assets per the non-current assets register and those physically present in each on the centres.This years programme of visits, which has been planned and carried out on the same basis as previous years, means that by the year end IA will only have visited the four largest centres and five of the other centres randomly selected.Payroll Ping Co has a human resources (HR) department, responsible for setting up all new joinders. Pre-printed joiners forms, which require all necessary data, are completed by HR for new employees and once verified, a copy if sent to the payroll department so that the employee can be set up for payment. The joiners form includes the staff members assigned employee number and the system requires the new joiners employee number to be entered before they can be added to payroll. All members of the payroll department can amend employees standing data in the payroll system as they have access to the password, which is changed by the payroll director on a quarterly basis.On monthly basis the employees are paid by bank transfer. The senior payroll manager reviews the list of bank payments and agrees this to the payroll records. If any discrepancies are noted,the senior payroll manager always makes the adjustment in the payroll records.Sales and bank After passing a credit check, new customers are set up in the receivables ledger master file and a credit limit is set by the sales director. The credit limits then remain unchanged in the system unless a review is requested by the customer.Each new customer is allocated a client services manager from Ping Co, who is responsible for managing the customer relationship and maximizing sales. Standard credit terms for customers are 30 days and on a monthly basis sales invoices which are over 90 days outstanding are notified to the relevant client services manager to chase payment directly with the customer.

Every month, the cashier reconciles the bank statements to the cash book. The reconciliations are reviewed by the financial controller, who also investigates all reconciling items and evidences his review by way of a signature.

Required:(a)Describe FOUR matters the auditor may consider in determining whether a deficiency in internal control is significant(4 marks)

(b)In respect of the internal control system of Ping Co:(i)Identify and explain THREE KEY CONTROLS on which the auditor may seek to place reliance; and(ii)Describe a TEST OF CONTROL the auditor should perform to assess if each of these key controls is operating effectively.(6 marks)

(c)Identify and explain FIVE DEFICIENCIES in Ping Cos internal control system and provide are commendation to address each of these deficiencies