The following are three (3) different scenarios in which you need to evaluate two procedures used for financial statements. First you must determine whether the control is important to identifying risks of material misstatement in financial statements or not, and if this is a significant risk for the business. Please explain your reasoning. Second you must determine if a combined approach for testing control is required or only substantive work? Explain.

Company A

A monthly analysis for inventory is completed to ensure inventory is sufficient and that they are staying within budget. A concern is that cost overruns will occur if no action is taken when it is apparent that they are outside the budget.

Company B

The company has a complete online sales ordering system. The customers enter all information including a credit card and its validated and if okay the order is processed. This also includes verification of availability of the product and making all financial transactions into the accounting system.

Company C

Higher than a $ dollar store mainly has transactions of cash sales.