Part a

Describe any two factors that affect the reliability of audit evidence. (1 Mark)

Part b

Explain the differences between the types of procedures the auditor would undertake to test for the existence, effectiveness and continuity of internal controls. (3 Marks)

Part c

During the planning stage of the audit, the auditor, Binod Rana, has identified the following three key internal controls over the functioning of a clients online inventory management system:

Internal Control No. 1

The system will not allow a customer to place an order for an item of inventory that is currently out of stock.

Internal Control No. 2

All new wholesale customers must undergo a credit approval check, which has to be signed by the credit manager before their credit limits are approved and a debtor accounts (accounts receivable) established.

Internal Control No. 3

Each customer is required to enter their unique customer identification number and person identification number (PIN) before an order can be processed. This to ensure that unauthorised inventory orders are not placed and only customers who are approved customers are able to order online.

Required

(i) For each Internal Control 1, 2, and 3 above, describe a test that Binod would perform to assess whether the control was functioning effectively. (3 x 1 Mark = 3 Marks)

(ii) Outline the result that Binod would expect to see if the internal control was functioning effectively. (3 x 1 Mark = 3 Marks)

Insert your answers in the following table.

Internal Control No.	(i) Test performed for control effectiveness (1 Mark)	(ii) Expected result if control is effective (1 Mark)
1
2
3