You are the audit manager working at Telson & Associates on the audit of Big Blue Marina

Pty Ltd (BBM) for the year ending 30 June 2013. BBM owns and operates a marina business

that offers berthing services for privately owned luxury yachts. The marina houses

approximately 90 boats at any one time. In addition to berthing services, BBM also offers its

customers cleaning, refuelling and catering services. Invoices for such services rendered by

BBM are payable within 30 days. The catering service is outsourced to a related party, 'Tastes

of the Sea', who supply all food and beverages.

You reviewed the work undertaken by Tom Snape, the junior auditor, during the first interim

visit, which included the two tests of controls detailed below:

1. In order to test whether authorised personnel only are able to access the payroll data in the

accounting system, Tom attempted to access the payroll data himself using the logins of

six different non-payroll staff in the accounting department. Tom was able to access and

amend the payroll data successfully on three of these six login attempts. As a result, Tom

concluded that the internal controls were not working, and therefore a fully substantive

audit approach should be adopted for auditing the employee-related expense and provision

accounts.

2. In order to test whether payments made to related parties were approved and signed off by

the CFO as required, Tom selected a sample of 15 payments made to related parties and

traced them back to the electronic funds transfer (EFT) form to sight the CFO's signature

of approval. Nine payments out of a sample of 15 payments had been approved by the

CFO in writing. The other six EFT forms did not contain the CFO's signature, but had a

notation that the CFO had given verbal approval. As the six EFT forms not containing the

CFO's signature were for immaterial amounts, Tom concluded that the internal controls

were working satisfactorily and that analytical procedures rather than substantive tests of

details could be used in auditing payments made to related parties.

As part of the final review stage of the audit, you again reviewed the audit working papers

and noted the following three matters:

1. The audit working papers for vouching property, plant and equipment indicate that an

invoice for a major asset acquisition during the financial year was not sighted. Tom noted

that he is waiting on this documentation from management. All other items selected were

vouched to supporting documentation.

2. The bank confirmation filed in the audit working papers is a photocopy sent to Telson &

Associates by the financial controller at BBM. The bank sent the original to BBM directly.

3. Some of the audit working papers were not signed off and dated by the audit staff member

at Telson & Associates who performed the work.

Required:

Q) Describe the impact the results of each of the tests of control would have on your other

audit procedures.