AUI3702
The Internal Audit Process: Test of Controls
Assignment 3
1st SEMESTER 2020
SOLUTIONS
, AUI3702 assignment 3 solutions 2020 semester 1
Question 1
1.1 Indicate the weaknesses in the above-mentioned portion of the cycle.
The weaknesses are:
Controls on recording receipts are not adequate since some loose pages may be lost.
There are poor controls on safeguarding cash. Cash is banked weekly instead of banking
it daily to avoid the risk of theft by both internal parties and external parties.
It appears that there are inadequate controls on confirming whether all remittance advices
sent to Ms Ramba are updated on the ledger since there are no reviews to check if all
remittance advices sent are updated.
It takes a long way for problems noted by Ms Ramba to be resolved since Ms Ramba has
to refer the problems to Mr Samba.
There is inadequate segregation of duties. Ms Samba is doing many roles. She resolves
problems with debtors and reconciles the receipts files. These tasks must be done by two
different individuals to minimize chances of fraud taking place.
1.2 Compile a list of six (6) audit procedures you need to perform on the portion of the
cycle as indicated above.[9]
Verifying controls put in place to avoid theft of cash
Reconciling cash received by the cash to cash banked by comparing deposit slips and
money received by the cashier within a given period of time.
Enquiring management information regarding controls which were put in place to ensure
effective communication.
Inspect whether loose pages are sequentially numbered to help an audit trial and avoid
duplication of receipts
Check backgrounds of Mr Cha-Cha inorder to understand his ethical position since he is
doing a fiduciary duty of handling cash
Identifying measures taken by management whenever problems arise with debtors which
may not be resolved.
The Internal Audit Process: Test of Controls
Assignment 3
1st SEMESTER 2020
SOLUTIONS
, AUI3702 assignment 3 solutions 2020 semester 1
Question 1
1.1 Indicate the weaknesses in the above-mentioned portion of the cycle.
The weaknesses are:
Controls on recording receipts are not adequate since some loose pages may be lost.
There are poor controls on safeguarding cash. Cash is banked weekly instead of banking
it daily to avoid the risk of theft by both internal parties and external parties.
It appears that there are inadequate controls on confirming whether all remittance advices
sent to Ms Ramba are updated on the ledger since there are no reviews to check if all
remittance advices sent are updated.
It takes a long way for problems noted by Ms Ramba to be resolved since Ms Ramba has
to refer the problems to Mr Samba.
There is inadequate segregation of duties. Ms Samba is doing many roles. She resolves
problems with debtors and reconciles the receipts files. These tasks must be done by two
different individuals to minimize chances of fraud taking place.
1.2 Compile a list of six (6) audit procedures you need to perform on the portion of the
cycle as indicated above.[9]
Verifying controls put in place to avoid theft of cash
Reconciling cash received by the cash to cash banked by comparing deposit slips and
money received by the cashier within a given period of time.
Enquiring management information regarding controls which were put in place to ensure
effective communication.
Inspect whether loose pages are sequentially numbered to help an audit trial and avoid
duplication of receipts
Check backgrounds of Mr Cha-Cha inorder to understand his ethical position since he is
doing a fiduciary duty of handling cash
Identifying measures taken by management whenever problems arise with debtors which
may not be resolved.
