YourTeam.com is an online retailer of university, college, and professional sports team memorabilia, such as hats, shirts, pennants, and other sports logo products. Consumers select the university, college, or professional team from a pull-down menu on the company's website. For each listed team, the website provides a product description, picture, and price for all products sold online. Customers click on the product number of the item they wish to purchase. YourTeam.com has established the following internal controls for its online sales:
1. Only products shown on the website can be purchased online. Other company products not shown on the website are unavailable for online sale.
2. The online sales system is linked to the perpetual inventory system that verifies quantities on hand before processing the sale.
3. Before the sale is authorized, YourTeam.com obtains credit card authorization codes electronically from the credit card clearing house.
4. Online sales are rejected if the customer's shipping address does not match the credit card's billing address.
5. Before the sale is finalized, the online screen shows the product name, description, unit price, and total sales price for the online transaction. Customers must click on the Accept or Reject sales buttons to indicate approval or rejection of the online sale.
6. Once customers approve the online sale, the online sales system generates a pending sales file, which is an online data file that is used by warehouse personnel to process shipments. Online sales are not recorded in the sales journal until warehouse personnel enter the bill of lading number and date of shipment into the pending sales data file.
REQUIRED
a. For each control, identify the transaction-related audit objective(s) being fulfilled if each control is in effect.
b. For each control, describe potential financial misstatements that could occur if the control were not present.
c. For each control, identify an important general control that would affect the quality of the control.
d. For each control, list a test of control to test its effectiveness