You are the auditor of XYZ Company for the year ended 30 June 2018. During your planning process, you note that the human resources department of XYZ has been short-staffed recently and has not been able to provide training to new staff responsible for administrative and financial processing functions. Generally, new staff members have experience within the industry.

 

While reviewing the accounting system you note that accounts receivable are agreed to the sub-ledger, but there is no aging review, and an increasing percentage of total receivables are falling into the 90 days+ categories. Timesheets for processing staff are approved by supervisors, then passed on to Susan Rogers in payroll. Susan prepares the pay sheet information, which gets reviewed against the timesheets and approved by the CFO, Peter Cummins, prior to payment being processed.

 

Access to the information technology (IT) system at XYZ is controlled by usernames and passwords, which are required to be changed regularly through a programmed system prompt.

 

REQUIRED:

1. 1) Identify and explain two internal control strengths and two internal control weaknesses for XYZ.
2. 2) Identify two potential errors for each weakness points identifies in point.
3. 3) Identify control activities to mitigate the risk of the weak points identified.