Get premium membership and access questions with answers, video lessons as well as revision papers.

Most errors in computer based accounting systems can be traced to faulty input. Controls over the completeness and validity of all inputs are vital. Control...

Most errors in computer based accounting systems can be traced to faulty input. Controls over the completeness and validity of all inputs are vital. Control over data conversions, controls over rejections and their correction and reprocessing, batch controls and computer edit controls affect both completeness and validity

Required:
a) Explain the controls that can be established over completeness of input.
b) What controls can be established over validity?
c) Programmed edit checks are probably the most familiar input controls and certainly the most effective. Give examples of these controls bringing out clearly:
i. The name of the edit control.
ii. Description of the control.
iii. The objective of the control.

Answers

a) You are required to explain the controls that can be established over completeness of input
Controls over completeness of input seek to ensure that all input data is captured by the system for processing
-Use of batch totals where by the total input data processed is compared with the original batch totals;
- Use of document count edit control to verify where transactions are supported by pre-numbered documents that all the transactions are recorded by reference to the documents utilised.
- By investigating any data rejections to ensure that the reasons are established and where necessary the data resubmitted for processing;
- Manual comparison of input data to output to ensure that all transactions have been recorded;
- Use of hash totals. A hash total is a control total without a defined meaning, such as the total of employee numbers or invoice numbers, that is used to verify the completeness of data. Thus the hash total for the employee listing by the personnel department could be compared with the total generated during the payroll run;
- Use of record count edit control. This is a control total of the number of records processed during the operation of a program.

b) Controls over validity
These controls seek to ensure that only valid transactions are processed. The controls that management can put in place include: - Validity checks in the hardware. This consists of the hardware that transmits or receives data comparing the bits in each byte to the permissible combinations in order to determine whether they constitute a valid structure;
- Reasonableness tests which check the logical correctness of relationships among the values of data items on an input and the corresponding master file record. For example if employees work only for eight hours, a reasonableness test could
be performed to determine that no employee is credited with more than eight working hours. Such control will check for the validity of the input data;
- Validity checks- these are tests of identification numbers or transaction codes for validity by comparison with items already known to be correct or authorised. For example KRA PIN numbers can be compared with the PIN numbers in the personnel records


c) The most common input controls are edit controls. Examples of edit controls include;

---

Wilfykil answered the question on February 21, 2019 at 07:47

Next: Your firm audits Clean Paints Ltd. and you are planning the audit of stock and work in progress for the year ended 31 December 2000....
Previous: Specialists or experts are occasionally required by external auditors mainly in connection with the valuation assets and the determination of liabilities.

View More CPA Auditing and Assurance Questions and Answers | Return to Questions Index

Related Questions

• Your firm audits Clean Paints Ltd. and you are planning the audit of stock and work in progress for the year ended 31 December 2000....(Solved)
  

  Your firm audits Clean Paints Ltd. and you are planning the audit of stock and work in progress for the year ended 31 December 2000. Clean Paints Ltd. determines the value of stock in its financial statements by the year -end stocktake. There is no perpetual Stock Inventory System though stock is counted quarterly for the purposes of management accounting
  Stock and work in progress is held at the warehouse which is next to the company‘s factory.
  Required:
  a) State the areas that you will expect the client‘s stocktaking instructions to cover.
  b) Describe the work you will perform and the matters you will record at the stock-take attendance.

  Date posted: February 21, 2019.  Answers (1)

• During the course of an audit, the auditor attempts to obtain sufficient relevant and reliable evidence to provide the satisfaction that the financial records are...(Solved)
  

  During the course of an audit, the auditor attempts to obtain sufficient relevant and reliable evidence to provide the satisfaction that the financial records are completed and accurate. One of the ways that the auditor obtains satisfaction is to select representative samples of transactions and balances for detailed testing, such samples being made using either statistical of non-statistical methods.
  
  Required:
  a) Describe the main factors which influence the auditor in determining the size of the sample he will use for his detailed testing.
  b) Describe three areas where the judgment will be exercised by the auditor when using statistical sampling.

  Date posted: February 21, 2019.  Answers (1)

• Write in point form an audit programme to cover salary and wages of a small size firm.(Solved)
  

  Write in point form an audit programme to cover salary and wages of a small size firm.

  Date posted: February 21, 2019.  Answers (1)

• Define the term audit programme.(Solved)
  

  Define the term audit programme.

  Date posted: February 21, 2019.  Answers (1)

• Write brief notes on the following auditing techniques: i. Inspection; ii. Observation; iii. Enquiry.(Solved)
  

  Write brief notes on the following auditing techniques:
  i. Inspection;
  ii. Observation;
  iii. Enquiry.

  Date posted: February 21, 2019.  Answers (1)

• The matter listed below are always included in the internal control of a firm. You are required to explain the purpose of each of the...(Solved)
  

  The matter listed below are always included in the internal control of a firm. You are required to explain the purpose of each of the items listed as (a), (b) and (c) below. Indicate the compliance tests you would carry out in order to ensure that the
  intended controls were operating properly.
  a) A requirement that mail is opened by two responsible employees who must promptly make listings of all receipts.
  b) A rule that a fixed asset register must be maintained and updated promptly.
  c) A requirement that a bank reconciliation statement is prepared on monthly basis.

  Date posted: February 21, 2019.  Answers (1)

• Working papers provide the audit evidence. They can be categorized into: i. Auditors‘ prepared working papers. ii. Client‘s schedules used as working papers. iii. Audit programmes. Working papers are...(Solved)
  

  Working papers provide the audit evidence. They can be categorized into:
  i. Auditors‘ prepared working papers.
  ii. Client‘s schedules used as working papers.
  iii. Audit programmes.
  Working papers are then organized into files usually referred to as either current files of permanent files.
  
  Required:
  a) What details should each working paper which is prepared by an auditor indicate?
  b) What details should each client schedule used as a working paper indicate?
  c) What details should an audit programme indicate?
  d) With appropriate illustrations, differentiate the use and contents of a permanent file from a current file and write brief notes on the evidence that is provided by working papers.

  Date posted: February 21, 2019.  Answers (1)

• Printa Limited is a large printing company, which has an on-line computer accounting system. The system is based around a central main frame computer, with...(Solved)
  

  Printa Limited is a large printing company, which has an on-line computer accounting system. The system is based around a central main frame computer, with terminals serving individual departments. As part of the interim audit work, you have been asked to carry out a preliminary evaluation of ;
  - The effectiveness of the computer controls over sales and debtors
  
  Required:
  Set out the points, which you would raise, in your preliminary evaluation of controls over sales and debtors

  Date posted: February 21, 2019.  Answers (1)

• It has often been said that the auditors‘ report is the formal result of all his efforts. This being the case, it is very important...(Solved)
  

  It has often been said that the auditors‘ report is the formal result of all his efforts. This being the case, it is very important that the reader well understands the meaning of the Audit Report, particularly where the auditor wishes to qualify his opinion on the financial statements.
  
  Required:
  a) Under statutory provision, what are the main contents of the auditors‘ report?
  b) Explain how the international standards on auditing attempt to ensure that the report of the auditors is clearly understood.
  c) Describe clearly the circumstances in which an adverse opinion and a disclaimer of opinion would be appropriate and give two examples, one each, to illustrate your answer. (A full audit opinion is not required).

  Date posted: February 21, 2019.  Answers (1)

• The cashier of a firm who also acts a bookkeeper has been suspected of dishonesty. The books have not been audited for the last nine...(Solved)
  

  The cashier of a firm who also acts a bookkeeper has been suspected of dishonesty. The books have not been audited for the last nine months. You have been asked to investigate the records to establish whether the cashier has committed a fraud
  
  Required:
  Outline how you would proceed with the investigation

  Date posted: February 21, 2019.  Answers (1)

• You are an audit senior in a firm of practicing accountants and your manager has gone out for an urgent meeting with a partner. Mr....(Solved)
  

  You are an audit senior in a firm of practicing accountants and your manager has gone out for an urgent meeting with a partner. Mr. Charo, a manager with Charo and Company, a wholesale business has come to your office with a request that your firm becomes their auditors
  
  Required:
  a) Describe to Mr. Charo the legal, ethical and practical factors your firm would consider before accepting the appointment.
  b) Explain to Mr. Charo the qualification and disqualification of an accounting firm under the provisions of the Companies Act to become auditors.

  Date posted: February 21, 2019.  Answers (1)

• Explain the following terms: (a) Materiality; (b) The duty of confidentiality; (c) Professional indemnity insurance; (d) Peer review; (e) Quality Control(Solved)
  

  Explain the following terms:
  (a) Materiality;
  (b) The duty of confidentiality;
  (c) Professional indemnity insurance;
  (d) Peer review;
  (e) Quality Control

  Date posted: February 21, 2019.  Answers (1)

• Discuss the proposition that the =expectations gap‘ has arisen because of the public‘s ignorance and should therefore be resolved by the public themselves(Solved)
  

  Discuss the proposition that the ‗expectations gap‘ has arisen because of the public‘s ignorance and should therefore be resolved by the public themselves

  Date posted: February 21, 2019.  Answers (1)

• Why should the auditor be unwilling to take full responsibility for the detection of fraud during the annual audit? Explain.(Solved)
  

  Why should the auditor be unwilling to take full responsibility for the detection of fraud during the annual audit? Explain.

  Date posted: February 21, 2019.  Answers (1)

• Does the auditor require a codified definition of ?reasonable care and skill or should this be left to professional judgment? Explain(Solved)
  

  Does the auditor require a codified definition of ―reasonable care and skill or should this be left to professional judgment? Explain

  Date posted: February 21, 2019.  Answers (1)

• Do you believe that the auditors should be responsible to users other than the shareholders? Give reasons to support your answer.(Solved)
  

  Do you believe that the auditors should be responsible to users other than the shareholders? Give reasons to support your answer.

  Date posted: February 21, 2019.  Answers (1)

• Explain how you would verify the following: a) Investment income. b) Bank balances. c) Contingent liabilities. d) Petty cash balances.(Solved)
  

  Explain how you would verify the following:
  a) Investment income.
  b) Bank balances.
  c) Contingent liabilities.
  d) Petty cash balances.

  Date posted: February 21, 2019.  Answers (1)

• Explain the following controlling procedures in a well planned audit: i. Direction and supervision of work. ii. Review and co-ordinating of work. iii. Quality controls(Solved)
  

  Explain the following controlling procedures in a well planned audit:
  i. Direction and supervision of work.
  ii. Review and co-ordinating of work.
  iii. Quality controls

  Date posted: February 21, 2019.  Answers (1)

• How does audit planning assist in the conduct of an audit?(Solved)
  

  How does audit planning assist in the conduct of an audit?

  Date posted: February 21, 2019.  Answers (1)

• Explain the auditor‘s planning process when planning for an audit of a new client.(Solved)
  

  Explain the auditor‘s planning process when planning for an audit of a new client.

  Date posted: February 21, 2019.  Answers (1)