Consider the following independent situations, each of which applies to an audit of a client for the year ending 30th June 2019.XYZ Ltd is a large machinery manufacturer that uses business-to business e-commerce to transmit purchase orders to its many suppliers. Each supplier electronically transmits an invoice, which is credited directly to the accounts payable file. The goods usually take one or two weeks to arrive. Once they have been received, a goods received notes is raised by XYZ and matched with the supplier’s invoice, and payment is authorised.Spiral Ltd’s credit officer, whose prime responsibility was setting and reviewing customers’ credit limits, retired during the year. The position has remained unfilled for six months, as no suitably qualified and experienced replacement has yet not been found.Kent Ltd failed to discover an employee fraud on a timely basis because bank reconciliations were not being done each month.Required:For each of the above situations:What is the impact on control risk?Give reasons why there is impact on control.The key account/s affected.Which assertion/s is affected?

Internal control is an important part of every organization. It helps in maintaining the efficiency…

Answered: Consider the following independent…

Accounting Information Systems

10th Edition

ISBN:9781337619202

Author:Hall, James A.

Publisher:Hall, James A.

Chapter14: Auditing It Controls Part I: Sarbanes-oxley And It Governance

Section: Chapter Questions

Problem 12P

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Consider the following independent situations, each of which applies to an audit of a client for the year ending 30^th June 2019.

XYZ Ltd is a large machinery manufacturer that uses business-to business e-commerce to transmit purchase orders to its many suppliers. Each supplier electronically transmits an invoice, which is credited directly to the accounts payable file. The goods usually take one or two weeks to arrive. Once they have been received, a goods received notes is raised by XYZ and matched with the supplier’s invoice, and payment is authorised.
Spiral Ltd’s credit officer, whose prime responsibility was setting and reviewing customers’ credit limits, retired during the year. The position has remained unfilled for six months, as no suitably qualified and experienced replacement has yet not been found.
Kent Ltd failed to discover an employee fraud on a timely basis because bank reconciliations were not being done each month.

Required:

For each of the above situations:

What is the impact on control risk?
Give reasons why there is impact on control.
The key account/s affected.
Which assertion/s is affected?

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