You are involved as an auditor at Grant Philips and has been assigned to the audit of Sunbeam Ltd for the year ended 30 June 2020. Sunbeam manufactures, wholesales and retails New Zealand man fashion clothing for sale both in New Zealand and Asia pacific. During the planning stage of the audit, you have identified the following three key internal controls over the functioning of Sunbeam's online inventory management system:

Control Mechanism (a) the system will not allow a customer to place an order for an item of inventory that is currently out of stock.

Control Mechanism (b) all new wholesale customers must undergo a credit approval check, which has to be signed off by Sunbeam's credit manager and CFO, before their credit limits are approved and a debtor account established.

Control Mechanism (c) each customer is required to enter their unique customer identification number and personal identification number (PIN) before an order can be processed. This is to ensure that unauthorised inventory orders are not placed and only customers who are approved customers are able to order online.

Required

(a) For each of internal controls a, b and c, describe a test that you would perform to assess whether the control was functioning effectively (3 marks)

(b) Outline the result that you would expect to see if the internal control was functioning effectively (4 marks)