Question:

Testing controls

Assume you are required to test the controls in these two audits, what five (5) tests might you perform?

Details:

Avocet Inc. Avocet is a franchise fast food restaurant business. When customers order food, the counter person presses the appropriate buttons on the cash register. There is a button for each menu item. The point of sale (POS) system retrieves the current item prices from the price files, extends for quantities ordered, and displays the sale total on the cash register screen. A sales entry is also generated in the daily sales register. The customer's payment is then entered and the food order displayed on a screen in the food preparation area. The POS system generates a cash receipt entry for the cash register and also in the daily cash receipts register. Food preparation staff put together the order and place it in the pickup area behind the front counter. When the food order is filled, the staff clears the order from the system; this generates an entry in the inventory system to remove the food and packaging items sold from the perpetual inventory listing. A restaurant manager is on duty at all times. The manager circulates between the counter and food services areas, observing that cash received is placed in the register and spot-checking that food orders match with cash sales. If a customer receives an incorrect order, the manager can void the sale entry using a special key in the cash register and a secret password for the POS entries. A corrected order is then input by the usual method, if required. At the close of each day's business, the cash in the register is totalled and agreed to the cash, debit card, and credit card slips collected in the register during the day. Differences of less than $10 are recorded in an account named Cash over/under. Larger discrepancies will be investigated by scrutinizing the day's entries and interviewing all counter people who used the register. The sales and cash information from the POS system is then uploaded to the franchise company head office, where it is consolidated with the reports from all the restaurants in the system. On a weekly basis, the food and packaging inventory on hand in the restaurant is counted and reconciled to the inventory system. The inventory usage is also compared with the sales records for reasonableness.

Prince Limited Prince is a new-car dealership. Once a customer has decided to buy a car, the car salesperson fills out a purchase agreement form, including the description of the car, the serial number, and the name and address of the purchaser. The agreed-upon sale price is entered, along with any extras, such as options or extended warranties, any allowance for a used car traded in, additional dealer preparation fees, licensing fees, and various taxes. A second form is used to outline the car purchase financing. The financing can be cash, a bank loan prearranged by the customer, or a lease arranged by Prince's financing company. Both forms are reviewed by the customer, and if they are satisfactory, the customer signs. The salesperson then takes the signed forms to the dealerships general manager for review and approval. If payment is by cash, the cash is given to the general manager at this point. Any discrepancies in the payment or paperwork are corrected and must be agreed to by the customer. Once the sales documents are completed, the ownership papers and keys are handed over to the customer, who drives away with the car. The sales documents are emailed to the car manufacturer's sales head office for inventory and warranty purposes, and to the bank or leasing company, if applicable. The sales information is entered by the Prince bookkeeper to the financial system and the inventory system. The bookkeeper follows up on collection of the funds from the bank or leasing company, which usually takes two to three days. The sales information is also set up in the dealership management system for purposes of sales incentives and commissions, future service work, and sales follow-up.