Question 3 Understanding and Assessing Control Risks (Total 20 marks) Assessing Control Risks Quality Furniture Ltd revealed the following through the enquiries and observations associated with understanding internal controls. The managing director Michael Jones has always placed a premium on the values of integrity and ethics. For years, business has been conducted on a handshake, and commitments made by the company were always honoured. Integrity and ethics are also valued in employees, and this quality has been evidenced in any employee who has been with the company for more than a year or two. In recent years, as the company has directed resources to a new product line, and company revenues have grown, the company has actively sought out competent employees to fill out the management team by bringing in a new chief operating officer and a new chief financial officer (CFO). Many accounting and information systems issues have been delegated to the CFO, Roma White, who has the responsibility for the company's financing needs, accounting, and information systems. Roma almost immediately initiated a project to upgrade the company's computerized accounting system. A new director of Information Systems (IT), Henry Smith, directly to Roma and oversees data control and systems security. Key positions within IT include a director of computer operations and a programming director. Roma was hired because of her familiarity with benefits and risks of enterprise resource planning systems, and she reviews progress on the new system installation with the IT manager monthly. The IT manager is also responsible for managing the current system until the new system has been tested and is ready to use. Furthermore Roma recently hired Bill Roberts to act as an internal auditor. Bill reports directly to the CFO. Currently the internal auditor is reconciling all bank accounts. The board of directors approved the hiring of an internal auditor, and, in the absence of an audit committee, Roma plans to discuss internal audit findings with the board of directors on an annual basis