Kế toán, kiểm toán - Chapter 9: Tests of controls

TESTS OF CONTROLSCHAPTER 91Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettTESTS OF CONTROLSProvide auditor with evidence to support their assessment of control risk. When control risk assessed at less than high, necessary to gather evidence that controls are working.Auditor will select most efficient and effective combination of tests of controls, and substantive tests of transactions and balances.Auditor must consider:DesignOperation of internal control structure2Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettPLANNING THE SCOPE OF TESTS OF CONTROLSNature: If controls exist that auditor expects to rely upon, undertake tests of these controls, otherwise undertake substantive testing.Timing: To aid ability to meet deadlines and scheduling of staff, tests of controls sometimes scheduled before year-end. Testing then extended (rolled forward) until year-end.Extent: For tests of controls related to documents, extent determined by reference to sampling theory. Controls related to accounting routines (e.g. back reconciliations) usually tested by re- performing a small number.3Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettTESTS OF CONTROLS AIMED AT DESIGNGenerally include:Inquiries of company personnelInspection of documents and reportsObservation of the application of specific internal control policies and procedures4Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettTESTS OF CONTROLS AIMED AT OPERATIONShould provide evidence that the: Control actually existedControl was effective in achieving its objectivesControl operated continuously throughout the period of intended reliance5Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettSUFFICIENCY AND APPROPRIATENESS OF TESTS OF CONTROLSDependent on level of control risk the tests must supportThe lower the planned assessed level of control risk, the greater the amount of testing that is required6Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettOTHER FACTORS AFFECTING SUFFICIENCY AND APPROPRIATENESSAuditor should also consider:Type and source evidenceTimelinessInterrelationship of evidence7Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettEFFECT OF DOCUMENTATION OF CONTROLS: AUDIT TRAILMethods used by auditor dependent on whether a documentary audit trail exists Where no audit trail exists, greater emphasis on:ObservationInquiry of the controlIf audit trail does exist:Inspect documentation for evidence of the control8Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettREVENUES, RECEIVABLES AND RECEIPTS (SALES CYCLE)Sales cycle involves all those transactions and events that are initiated when an entity makes a sale. Characterised by a high volume of routine transactions.Audit problems tend to be related to clerical processing rather than complex accounting problems.9Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettKEY FUNCTIONS IN TYPICAL SALES CYCLEOrder entry and order approval by credit departmentShippingInvoicingGeneral ledger entryAccounts receivableMail openingCashier functions10Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettTYPICAL CREDIT SALES FLOWCHART11Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettTYPICAL CASH COLLECTION FLOWCHART12Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettSALES CYCLE — ROUTINE AND NON-ROUTINE TRANSACTIONSRoutine transactions: credit sales to customers, cash collections from customers (flowcharts), usually strong control system, auditor considers (and usually undertakes) tests of controls.Non-routine transactions: adjustments to sales, and provisions for doubtful debts. Less well controlled. Where material, auditor undertakes substantive testing.13Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettCONTROL OBJECTIVES FOR SALES SYSTEMControls are in place to ensure that:All sales recorded are bona fide transactions for merchandise actually shipped to customers.All sales for the period of merchandise shipped are invoiced and properly recorded in accounting records.Invoices have been recorded correctly as to amount and period and summarised correctly.Sales are disclosed and classified in accordance with disclosure policies.From Table 9.4 (p. 397)14Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettEXAMPLE OF LINKING OBJECTIVES TO CONTROL POLICIES AND TESTS OF CONTROLS FOR SALES (From Table 9.4 p. 397)Special control objectivesCommon control policies and proceduresTests of controlsAll sales recorded are bona fide transactions for merchandise actually shipped to customersPolicy of authorisation of credit and termsQuantities shipped periodically reconciled to quantities invoiced independently of shipping and invoicingMonthly statements mailed to customersSigned acknowledgment that goods are received by customersSelect a sample of sales transactions from sales journal (daily activity report), check for appropriate authorisation and trace to shipping document fileInspect reconciliation of shipments to invoicesObserve mailing of monthly statements, examine customer correspondence file and investigate non-cash credits to accounts receivable15Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettCONTROL OBJECTIVES FOR CASH RECEIPTS SYSTEMControls are in place to ensure that:Recorded cash receipts are for collection of receivables from customersAll cash receipts are recorded and depositedCash receipts have been recorded correctly as to account, amount and periodRef.: Table 9.5 (p. 400)16Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettEXAMPLE OF LINKING CONTROL OBJECTIVES TO CONTROL POLICIES TO TESTS OF CONTROLS: CASH RECEIPTS (Ref.: Table 9.5 p. 400)Special control objectivesCommon control policies and proceduresTest of controlsRecorded cash receipts are for collection of receivables from customersCash receipts matched to specific sales invoices in posting to accounts receivable master fileSelect a sample of entries in cash receipts journal and trace to remittance advices or sales invoices17Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettTYPES OF MISSTATEMENTS IN SALES CYCLEGenerally result of:Clerical mistakesEmployee fraudMisapplied accounting principlesManagement fraud18Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettEXPENDITURES, PAYABLES AND DISBURSEMENTSExpenditures cycle — all transactions and events initiated when an entity acquires assets or services used for cash or credit. Auditors (and many entities) often separate this cycle into a number of sub-cycles, which reflect various types of services and assets that can be acquired.19Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettSUB-CYCLES IN EXPENDITURES,PAYABLES AND DISBURSEMENTSThese sub-cycles are:PayrollProperty, plant and equipmentInventoryIncome taxesIncurrence of selling and administrative expensesMiscellaneous expenses paid from petty cash20Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettKEY FUNCTIONS WITHIN THE INVENTORY SUB-CYCLEPurchasingAccounts payableCash disbursements function21Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettTYPICAL PURCHASES AND CASH PAYMENTS FLOWCHART22Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettCONTROL OBJECTIVES IN A PURCHASES OF INVENTORY SYSTEMControls are in place to ensure that:All recorded purchases are bona fide transactions in that they relate to goods or services authorised or received.All purchases for the period of inventory received are recorded.Purchases of goods or services for inventory are recorded correctly as to account, amount and period, and summarised correctly.Purchases are disclosed and classified in accordance with disclosure policies.From Table 9.6 (p. 409)23Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettEXAMPLE OF LINKING CONTROL OBJECTIVES, CONTROLS AND TESTS OF CONTROLS: PURCHASESSpecial control objectivesCommon control policies and proceduresTests of controlsAll recorded purchases are bona fide transactions in that they relate to goods or services authorised or receivedGoods received are counted, inspected and compared to purchase order before acceptanceServices received are acknowledged in writingComparison of purchase order, receiving report and supplier’s invoice and recomputation of supplier’s invoice before recording liabilitySelect a sample of order entries in purchases journal, trace back to vouchers and inspect for existence of supporting document including receiving report, ensuring agreement of details and indication of approvalObserve and inquire about receiving proceduresFrom Table 9.6 (p. 409)24Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettCONTROL OBJECTIVES IN A CASH DISBURSEMENTS SYSTEMControls are in place to ensure that:Recorded cash disbursements are for goods or services authorised and received.All cash disbursements are recorded.Cash disbursements are recorded correctly as to account, amount and period.From Table 9.7 (p. 410)25Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettEXAMPLE OF LINKING CONTROL OBJECTIVES, CONTROL AND TESTS OF CONTROLS: CASH DISBURSEMENTS (Ref.: Table 9.7 p. 410)Special control objectivesCommon control policies and proceduresTests of controlsRecorded cash disbursements are for goods or services authorised and receivedCheques printed or prepared only when supporting documents compared, recomputed and voucher approvedCheques signed only after viewing supporting documentation and prior approvalCheque signing independent of initiating or approving purchases, cheque preparation and accounting functionsSupporting documentation cancelled and reference to cheque numberSelect a sample of cash disbursement transactions from cash payments journal and inspect supporting documentation for indication of checking, review and approval, and reperform checkingObserve and inquire about cheque preparation and signing and protection of unissued chequesFor the sample of cash disbursement transactions inspect supporting documents for cancellation, cheque number and endorsement26Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettPOTENTIAL MISSTATEMENTS INEXPENDITURE CYCLEAs expenditure cycle involves disbursementsof cash there is a greater risk of fraud orirregularity, including:Classic disbursements fraudKickbacksIllegal actsUnauthorised executive perksKiting27Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettSELLING AND ADMINISTRATIVEEXPENSESProcessing and related control policies and procedures for selling and administrative expenses are similar to those for purchases of inventory.Auditor will normally obtain comfort from cash disbursement testing for inventory purchases and perform minimal testing in this area.Analytical procedures (e.g. comparing balance with prior periods) widely used as a key type of testing.28Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettPETTY CASH DISBURSEMENTSPetty cash disbursements are usually immaterial in amount and therefore few, if any, audit procedures are applied to this area.Where the area is significant, emphasis is on ensuring appropriate procedures are in place to safeguard cash.29Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettPAYROLLThe payroll function is usually audited ineither of two ways (or best combination):Focusing on analytical procedures (there are disaggregated and strong relationships in this area, e.g. comparing fortnightly payrolls); orAn emphasis on tests of transactions over the payroll area with a key control being appropriate segregation of duties of hiring function, approval of time worked, payroll preparation and payroll distribution.30Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettTESTS OF CONTROLS IN PAYROLLIf tests of controls are necessary the following audit procedures may beundertaken:Authorisation by supervisors of time workedCheck signed time cards/sheets Use of approved pay rates (personnel department)Check for reasonableness, compared with awards31Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettINTEREST, RENT, LEASE AND INSURANCE PAYMENTSUsually a substantive approach of checkingterms and conditions to contracts.Auditor interested in the key control of authorisation of the contractAccounting treatment of leases complex, and auditor might check controls to ensure properly accounted for32Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettTESTING CONTROLS IN CLIENT COMPUTER PROGRAMSSeparate techniques have to be developedfor testing programmed controls. These are:Test dataIntegrated test facilityControlled processing, reprocessing or parallel processingReview program code and results of job processing33Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettTEST DATAFigure 9.4 (p. 416)34Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettINTEGRATED TEST FACILITYFigure 9.5 (p.417)35Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettAUDITING THROUGH COMPUTER — PROCESSING CLIENT DATAControlled processing. Auditor establishes control over processing of client’s data. Controlled reprocessing. Auditor reprocesses client data.Parallel processing. Simultaneously processes client data through client and auditor programs.36Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettAUDITING THROUGH COMPUTER — NON-PROCESSING APPROACHESProgram code review. Involves reviewing relevant code line by line, considering whether processing steps and control procedures are properly coded and logically correct.Review of job accounting data. Involves review printed log of jobs, looking for excessive processing time, abnormal halts, etc.37Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettADVANCED CAATsSystems control audit review file (SCARF) Audit modules embedded in programs to monitor transaction activitySnapshotTransactions are tagged and then identified at certain points during processing to see how program is treating themAudit hooksPoints in program that allow auditor to insert commands for special processing38Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger SimnettIMPACT OF STRATEGIC BUSINESS RISK ON TESTS OF CONTROLSApproach increases emphasis on non-routine transactions and decreasesemphasis on routine transactions:Expect a satisfactory IC structure around routine transactions; therefore must undertake tests of controls to support this expectationTherefore either no change or increased emphasis on tests of controls39Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a Auditing and Assurance Services in Australia by Gay & SimnettSlides prepared by Roger Simnett