144-3 A summary of the controls for the acquistion cycle of Keystone Computers &
ID: 2543110 • Letter: 1
Question
144-3 A summary of the controls for the acquistion cycle of Keystone Computers & Networks, Inc., appears on pages 602-503. Required: a. For the following three controis ower the acqusition cycle, indicate one type of error or fraud that the control serves to prevent or detect Organize your solution as folows 1. Computer matches information from vendors' invoice wth purchase order and receving data 2. The computer numbers to receiving reports. 3. Checks are maled by check signer b. For each of the contrels described above, ind cate how the audeors could test the control. Organize your answer as folows: Tests of Controls Computer matches information from vendors invgice with purchase order and receving data. 2. The comouter sssigns numbers to receiving 3. Checks ane maied by the check signer t4A-2 As ind cated on the conrul rsk assessment warking paper on page 602, the audtors rtentefsed two weaknesses in ntermal control over the acquiseion cytle d KCN. Devcribe the mplcations of each of the twe weaknesses in terms of the type of errors or fraud that could result Pu. 602 :. Approved vendors are selected by Moderate Risk due to valuation and purchasing manager who also purcheses goods. 2. Vendors statements are not Reconoled to the accounting records. Moderate Risk ae to Valuation and Accuracy. Low risk due to Existence or occurrence, Moderate Risk due to CompletenessExplanation / Answer
In the first case regarding error or fraud controlled, 1.this type of control will let to know whether the goods are actually supplied on the basis of initiation raised from the customers and on proper order terms, non existanceand mismatch of which may lead to wrong supply of goods to the parties in the abscense of purchase order with out consideration of purchase terms regarding price, repayment terms etc.,which may lead to malpractises like extension of credit term, discounted prices and sometimes even lead to missing of stock and even loss of reputation to the entity.
In the second case, there will be effective control over receipt of reports which otherwise lead to missing of reports intentionally as there is no proper check leading to even loss of turnover.
In the third instance, there will be more effective control as the each document get signed but there will be other side also as the document wholly did not get into light either intentinally or not, in those cases there will be considerable loss all together as there might be possiblity of using ot for own benifits
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