Question 1

An understanding of the clients internal control will assist the auditor to understand and identify potential misstatements and factors that affect the risks of material misstatements as well as in designing the nature, timing and extent of the audit procedures to be used in the audit. You have been assigned to audit a supermarket in a rural town.

Required:

1. Explain TWO (2) limitations of internal control systems that are at the clients organisation. (4 marks)

2. Describe FOUR (4) methods of documenting the accounting and control systems at the supermarket. (12 marks)

3. Summarise how the following would be applied at the supermarket:

1. Segregation of duties

2. Physical controls

3. Authorization and approval

4. Management controls (4 marks)

(Total 20 marks)