The earning of profit is a necessary element in the operation of a free enterprise economy. It enhances the efficiency of a free market system in the following ways: • Normal profit is a cost of production; it is the cost of the entrepreneurship factor of production. It is the minimum amount that the entrepreneur
Importance of system documentation. i. Provides a basis for management to review the system prior to authorisation ii. Staff training on the use of system. iii. Implements smooth personnel changes and avoiding the problem that key employees may take with them all knowledge about the way the system works. iv. Revising existing systems and programs
How and why both systems should run parallel prior to the change over to the new system. How The client should continue to process the information using the old system while at the same time implement the new system. The output from the new system should be compared with the output from the new system.
You are required to discuss the importance of segregation of duties as a control procedure. Segregation of duties refers to the separation of the various duties and responsibilities such that one person cannot process and record complete transactions from beginning to the end without being checked by another person. E.g. in the purchase of a
Since ACB Computers Limited has failed within a year and the auditor had given an unqualified report, certain parties may be able to successfully sue him for negligence. The decision in the Caparo case is that only the company and the shareholders as a body can bring a claim for negligence against the auditor. It
b) Ways to control the audit 1. Scoping of the work and delegation First I would determine the scope of the work to be carried out and our client‘s expectation. Basing on this I will identify the staff that I will require to carry out the work. In doing this I will need to consider,
Matters to consider when planning the audit In planning the audit the auditor will need to consider the following: 1. Understanding the accounting and internal control systems The auditor‘s cumulative knowledge of the accounting and in ternal control systems and the relative emphasis expected to be placed on tests of control and substantive procedures. 2.
You are required to briefly explain the meaning of the term “control procedures”. Control procedures are the detailed policies and procedures established by management within the control environment. Control procedures put together constitute an internal control system. For example the requirement that all purchase orders must be authorised by a senior responsible company official is
Application controls These are control procedures over the accounting system designed to provide reasonable assurance that all transactions are authorised, recorded and processed completely, accurately on timely basis. Application controls may be manual or programmed and are include • Controls over input • Controls over processing • Controls over output • Controls over master files
I will perform the following work in checking sundry creditors and accruals I will assess the level of accruals and the system of control. If the company‘s system of determining accruals is good, I will perform less work than if the controls are weak; I will compare this year‘s accruals with the previous year. I