The purpose of this assignment is to help you assess your ability to determine the significant aspects of the results of an audit of Accounts Payable $($A$/$P$)$ and related reporting requirements. This assignment requires you to identify the related COSO objective$($s$)$ of an A$/$P audit, whether a control deficiency is either in "design" and$/$or in "operating effectiveness$,$ the "level" $($i$.$e$.,$ insignificant, significant, or material$)$ of such deficiencies, and reporting requirements by IA and management.

For this assignment, you will need to read the following context and then follow the directions below.

Context

During its assessment of the accounts payable department, the internal audit function made several observations, which have been agreed to by management. The observations were:

I. Inadequate segregation of duties over certain information system access controls. Potential loss exposure of $$45$ million.

II$.$ Several instances of transactions that were not properly recorded in subsidiary ledgers. Transactions were not material either individually or in the aggregate. Potential loss exposure of $$60$ million.

III. A lack of timely reconciliation of the account balances, affected by the improperly recorded transactions. Potential loss exposure of $$25$ million.

Management and the independent auditors have determined that an amount less than $$20$ million is inconsequential in impact and that an amount greater than $$80$ million is material in impact.

Directions

For this assignment, answer the following questions:

A$.$ Based only on the facts above, for each observation:

$1.$ Determine the COSO objectives category affected by each observation.

$2.$ Classify each observation as to whether it falls under "design adequacy" and$/$or "operating effectiveness".

$3.$ Assess whether each observation is "Insignificant", "Significant", or "Material".

$4.$ And finally, provide your overall conclusions for this audit of accounts payable.

B$.$ Describe what should be communicated and to whom, regarding these observations and conclusions by:

$1.$ Internal audit.

$2.$ Company management.

Please use the below format for your submitted answers, using a table or spreadsheet:Please use the below format for your submitted answers, using a table or spreadsheet:

Response Spreadsheet or Table Format