Strengths of internal control of the acquisition
Added on 2020-04-07
9 Pages2034 Words173 Views
AUDIT THEORY
AuditContentsAnswer-1.....................................................................................................................................................2Strengths of internal control of the acquisition...........................................................................................2i.Proper approvals-................................................................................................................................2ii.Delegation of duties-...........................................................................................................................2iii.Proper recording of transaction-.........................................................................................................3iv.No misuse of asset-..............................................................................................................................3v.Updation of registers-..........................................................................................................................3vi.Monthly reconciliations-......................................................................................................................4vii.Appropriate calculation of depreciation-.........................................................................................4Answer-2.....................................................................................................................................................5Procedures for testing the internal control of the system...........................................................................52
AuditAnswer-1Strengths of internal control of the acquisitionThe strengths of internal control of the acquisition and disposal of tangible non-current assets of B Ltd are as follows:i.Proper approvals-The company has its departments and every department is managed by a designated manager who raises his request for purchase of a new asset in a purchase requisition form. This form is then checked by the purchasing officer. If the purchasing officer finds the request as valid, he acknowledges and approves the same and then sends it to the finance department. This is a great procedure followed by the company which follows two stages of approval- first by the departmental manager and then by the purchasing department (Coram et. al, 2011). Hence, when the process moves through a two-way step then it is easy to check and verify the entire matter. Moreover, in suchcases, the chances of deviations are less. ii.Delegation of duties-The financial accountant then approves the acquisition of assets of over $5,000 but upto $10,000 only. Beyond $ 10,000 purchase is approved by the board of directors only. In absence of any information, the assets costing less than $5,000 is assumed to be approved by the financial accountant only. This reduces the burden of the board of directors to some extent. As the accountant is concerned with the financial data so theonus of the approval resides with him and not the board of directors. 3
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