The resulting bar chart shows that when HMK is the AR Clerk and FKL is the Cash Receipts Clerk, CT is the GL Accounting Clerk for $226,851 of current AR balances. However, there are $25,352 of current AR for which HMK acted as both AR Clerk and GL Accounting clerk. This shows that employee HMK occasionally acts in multiple roles on the same transaction. the total dollar volume of AR that was not approved is 13726. above identified instances of ineffective operation of key controls in the revenue cycle.

1) How would these identified control deficiencies affect the nature, timing, and extent of substantive procedures for the revenue cycle?

2) What role does materiality play in classifying the type of control deficiencies identified in Problems 1 and 2 above?

3) Revenue is recognized when shipped. Based on shipping dates in the shipping file, total revenue for 2018 is $1,372,637. The audit team has set overall materiality at $13,000. How would you classify the authorization control deficiency identified in problem 2? Control deficiency, material weakness, or significant deficiency?