Question C8.3 is based on the following case.

Mobile Security, Inc. (MSI) has been an audit client of Leo & Lee, LLP for the past 12 years. MSI is a small, publicly traded aviation company based in Cleveland, Ohio, where it manufactures high-tech unmanned aerial vehicles (UAV), also known as drones, and other surveillance and security equipment. MSI's products are primarily used by the military and scientific research institutions, but there is growing demand for UAVs for commercial and recreational use. MSI must go through an extensive bidding process for large government contracts. Because of the sensitive nature of government contracts and military product designs, both the facilities and records of MSI must be highly secured.

In October 2022, MSI installed a new cloud-based inventory costing system to replace a system that had been developed in-house. The old system could no longer keep up with the complex and detailed manufacturing costing process that provides information to support competitive bidding. MSI's IT department, together with the consultants from the software company, implemented the new inventory costing system which went live on December 1, 2022. Key operational staff and the internal audit team from MSI were significantly engaged in the selection, testing, training, and implementation stages.

The inventory costing system uses various manufacturing costing and unit of production inputs to calculate and produce a database of all product costs and recommended sales prices. It also integrates with the general ledger each time there are product inventory movements such as purchases, sales, waste, and damaged inventory losses.

It is now February 2023 and you are beginning the audit planning for the June 30, 2023, annual financial statement audit. You are assigned to assess MSI's IT controls with particular emphasis on the recent implementation of the new inventory costing system.

C8.3 (LO 3, 4) IT application controls Analysis: MSI's new inventory costing system integrates with its sales system. MSI integrated an IT application control that checks each sales transaction to ensure that it is supported by shipping documents, packing slip and bill of lading, before a sales invoice is created.

1. a. How would you test the IT application control described above?
2. b. What assertion is controlled by the IT application control described above?
3. c. In order to rely on the IT application control, what other evidence is needed if the auditor wants to assess control risk as low?