Shelly: And how about your accounting department? How big is it, and who oversees the accounting process? Norvs: The accounting department of the Company consists of five part-time clerks, including the two encoders, who are all paid weekly. Most of them are working students taking accountancy or business-related course. Red trains all new accounting help when they are first hired. Typically, they stay on with us until they graduate which usually covers two full years. We keep them pretty busy around here, but everyone helps each other out and they always get the job done. Shelly: What are your sister May’s responsibilities? Norvs: May manages the service component of the business. Being an engineer herself, she trains all newly hired technicians and cleaning employees and explains their specific duties and responsibilities. When she feels sure that the employee is ready, the new hire is teamed with a more experienced worker and assigned to a truck unit. When additional help is needed, May places ads in the local newspaper. May is the expert at running at that end of the business. Shelly: I’m also interested in your security measures. How do you protect your accounting records and physical assets? Norvs: After hours, the office door and windows are securely locked. All three of us – May, Red (general manager), and I – have keys to open the office. To tell you the truth, none of the file cabinets used to store the hard copies of the accounting records and data files is locked up at night. We don’t have the computers bolted down to the desks, either. It’s occurred to us that maybe we should lock everything up, but we’ve never had any problems. Which of the following statements is/are true? Statement I. Management should lessen hiring working students as part of their accounting department because it might affect the work as they may not have the sufficient background and expertise. Statement II. May is committed to provide the necessary training by the technicians. May contributes to a strong monitoring component of internal control. Statement III. With regards to security measures, the extent to which physical controls intended to prevent theft of assets are relevant to the reliability of financial reporting, and therefore, the audit depends on the circumstances such as when assets are highly susceptible to misappropriation.
Shelly is an internal audit manager of Air Clean and Safe Express, Inc., a publicly listed company, which provides general air conditioner cleaning and maintenance services to its industrial and residential customers. This will be the first time that the company will be audited. Thus, Shelly does not have any previous working file to review. Shelly recently conducted a preliminary interview with Mr. Norvs Gorgeous, who along with his sister, Ms. May Gorgeous owns the company.
Interview with Auditee (Independent Situation)
Shelly: And how about your accounting department? How big is it, and who oversees the accounting process?
Norvs: The accounting department of the Company consists of five part-time clerks, including the two encoders, who are all paid weekly. Most of them are working students taking accountancy or business-related course. Red trains all new accounting help when they are first hired. Typically, they stay on with us until they graduate which usually covers two full years. We keep them pretty busy around here, but everyone helps each other out and they always get the job done.
Shelly: What are your sister May’s responsibilities?
Norvs: May manages the service component of the business. Being an engineer herself, she trains all newly hired technicians and cleaning employees and explains their specific duties and responsibilities. When she feels sure that the employee is ready, the new hire is teamed with a more experienced worker and assigned to a truck unit. When additional help is needed, May places ads in the local newspaper. May is the expert at running at that end of the business.
Shelly: I’m also interested in your security measures. How do you protect your accounting records and physical assets?
Norvs: After hours, the office door and windows are securely locked. All three of us – May, Red (general manager), and I – have keys to open the office. To tell you the truth, none of the file cabinets used to store the hard copies of the accounting records and data files is locked up at night. We don’t have the computers bolted down to the desks, either. It’s occurred to us that maybe we should lock everything up, but we’ve never had any problems.
Which of the following statements is/are true?
Statement I. Management should lessen hiring working students as part of their accounting department because it might affect the work as they may not have the sufficient background and expertise.
Statement II. May is committed to provide the necessary training by the technicians. May contributes to a strong monitoring component of internal control.
Statement III. With regards to security measures, the extent to which physical controls intended to prevent theft of assets are relevant to the reliability of financial reporting, and therefore, the audit depends on the circumstances such as when assets are highly susceptible to misappropriation.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
