Question 07 Marks 3.0

As part of your audit of RPL for the year ended 30 June 2018, you are reviewing internal controls over RPLs print-on-demand business.

a Classify the following control activities as a manual control, an IT application control or an IT general control.

1. The digital library is backed up daily, with the backup tapes kept off site

2. The accounting system automatically stops the order for any publishers who have exceeded their credit terms and limits

3. When an order exceeds the credit limit, an authorisation from both the heads of publishing and accounts is required for the transaction to proceed

4. The accounts receivable clerk checks the prices and arithmetic accuracy of the invoices and signs the invoice as evidence of her check

5. The cashier then reconciles the total of the batch postings to accounts receivable to the amount banked for the day

6. The assistant accountant prepares a bank reconciliation each month

7. Segregation of duties between accounts receivable and cash handling functions

b Based on the background information, identify and explain two key internal control weaknesses where control activities should be present in order to prevent material misstatements being undetected and/or uncorrected, but are not present.

c For each control weakness identified in b, identify one key account balance at risk and explain why it is at risk.

d For each account balance identified in c, identify one key assertion that may be at risk.