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12-31
12-35 (continued)
Establish standardized programming procedures and have
procedures.
Melinda should reconcile the Job Processed Log to the job
3. Assessment of the strengths of the programming function at
Jacobsons:
The programming staff is experienced with both systems
software and Jacobsons’ application software.
Programmers regularly attend continued professional
education courses.
Extensive logs of tape use and of changes made to programs
are maintained.
Concerns about the programming function:
systems software.
Programmers are responsible for maintaining secondary
storage of live programs and data files. Thus, programmers
at Jacobsons:
Divide programmers into systems programmers and application
programmers. Only assign system software changes to systems
programmers and application software changes to application
programmers.
Reassign responsibility for maintaining secondary storage
4. Assessment of the strengths of the IT operations function at
Jacobsons:
Melinda prepares a job schedule which operators follow to
12-32
12-35 (continued)
Operators perform routine monthly backup procedures.
Input batch controls are generated to verify the accuracy
and completeness of processing.
Concerns about the IS operations function:
risk of data loss.
No one, other than operators, verifies that only jobs included
on the job schedule are processed. Melinda depends totally
exceptions noted by operators.
application programs.
Comparison of batch input control totals to computer processing
is not performed by someone independent of the operator
responsible for the processing.
IS operations function:
Update key data files and program tapes on a more periodic
basis (perhaps daily). Store backup copies offsite.
5. Assessment of the strengths of the IT data control function at
Jacobsons:
Concerns about the IT data control function:
Data control personnel have the authority to approve changes
a non-existent employee.
Recommendations for change related to the management of the
IT data control function:
12-35 (continued)
department authorized changes to master files.
6. Users should be responsible for approving changes to master
files. They should actively compare authorized input to output to
ensure the accuracy, completeness, and authorization of output.
12-36 ACL Problem
a. There are 5,298 records in the “Purchase_orders” dataset, with a
total dollar value for the purchase order amount column of
b. Below is the ACL output from the Stratify command for the
Purchase Order Amount column. The first strata with purchase
12-34
12-36 (continued)
would want to know why there are 343 purchase orders missing,
and whether they were used but not recorded. If they were used but
not recorded, the auditor would be concerned about a potentially
material understatement of purchases. It is possible the purchase
overstatement of purchases if they were being recorded more than
once.
d. Highlighting the “Requisition Number” column, and using the
“Summarize” command, there are 3,097 purchase transactions (out
the client required a purchase requisition for all purchase
transactions, or an indication of why that policy may be violated
(e.g., if a purchase needs to be expedited and no one is available
to approve a requisition). The concern when there is no requisition
for a legitimate business purpose.
e. Use the “Classify” command to classify by vendor number with a
subtotal for purchase amount and save the output to “file.” That
indicates there are 2,823 unique vendor numbers. Performing a
“Quick Sort” of the percent of field column (in descending order) in
VN-0010390476508.
12-35
12-36 (continued)
po_number
po_date
vendor_number
po_amount
created_on
028493214615
1/19/2014
VN-0010090307334
115183.06
1/19/2014
028493215666
3/26/2014
VN-0010000259877
109933.27
3/26/2014
028493215782
4/5/2014
VN-0010340106140
149638.15
4/5/2014
028493215789
4/1/2014
VN-0010230187330
127375.73
4/1/2014
028493215811
4/7/2014
VN-0010000394772
108840.26
4/7/2014
028493215837
4/5/2014
VN-0010090260265
105883.12
4/5/2014
028493215843
4/6/2014
VN-0010260172176
128973.34
4/6/2014
028493215844
4/7/2014
VN-0010070247341
101968.05
4/7/2014
028493215924
4/14/2014
VN-0010000024372
111524.37
4/14/2014
028493215931
4/9/2014
VN-0010000271470
109810.9
4/9/2014
028493216120
4/20/2014
VN-0010000110409
114456.03
4/20/2014
028493216185
4/26/2014
VN-0010000433003
137635.35
4/26/2014
028493216189
4/26/2014
VN-0010260179830
115138.1
4/26/2014
028493216213
4/28/2014
VN-0010000195648
165841.62
4/28/2014
028493216220
4/30/2014
VN-0010000245035
227778.89
4/30/2014
028493216221
4/27/2014
VN-0010390088981
150800.65
4/27/2014
028493216250
5/3/2014
VN-0010000147105
102095.08
5/3/2014
028493216432
5/12/2014
VN-0010090203173
126002.08
5/12/2014
028493216438
5/7/2014
VN-0010450022589
115068.47
5/7/2014
028493216439
5/10/2014
VN-0010390190953
140503.18
5/10/2014
028493216467
5/12/2014
VN-0010450113576
132830.82
5/12/2014
028493216559
5/18/2014
VN-0010000256594
106881.05
5/18/2014
028493216591
5/20/2014
VN-0010090193739
138132.97
5/20/2014
028493216596
5/18/2014
VN-0010160206123
102713.45
5/18/2014
028493216597
5/18/2014
VN-0010000269163
104790.21
5/18/2014
028493216619
5/19/2014
VN-0010070241895
108725.19
5/19/2014
028493216718
5/26/2014
VN-0010210023460
106386.5
5/26/2014
028493216747
5/26/2014
VN-0010410272994
125765.85
5/26/2014
028493216752
5/27/2014
VN-0010480512685
152527.65
5/27/2014
028493216753
5/25/2014
VN-0010070502023
148475.86
5/25/2014
028493216914
5/31/2014
VN-0010000268675
155921.72
5/31/2014
028493216922
6/4/2014
VN-0010250311629
117570.63
6/4/2014
028493217004
6/7/2014
VN-0010070108651
103041.69
6/7/2014
028493217009
6/4/2014
VN-0010200427270
108830.02
6/4/2014
028493217050
6/8/2014
VN-0010090260265
135321.12
6/8/2014
028493217057
6/8/2014
VN-0010480078505
117350.22
6/8/2014
12-36
12-36 (continued)
028493217135
6/15/2014
VN-0010000267717
200945.74
6/15/2014
028493217142
6/14/2014
VN-0010330031684
199494.08
6/14/2014
028493217274
6/21/2014
VN-0010070241895
110073.07
6/21/2014
028493217278
6/18/2014
VN-0010000259361
117540.23
6/18/2014
028493217392
6/28/2014
VN-0010000087814
111687.45
6/28/2014
028493217398
6/24/2014
VN-0010000102912
101973.45
6/24/2014
028493217423
6/29/2014
VN-0010000147105
108972.1
6/29/2014
028493217431
7/1/2014
VN-0010100020125
107515.38
7/1/2014
028493217544
7/2/2014
VN-0010450319216
139761.96
7/2/2014
028493217715
7/12/2014
VN-0010000281402
164763.19
7/12/2014
028493217722
7/14/2014
VN-0010160228550
122279.13
7/14/2014
028493217723
7/12/2014
VN-0010070052167
127611.4
7/12/2014
028493217815
7/21/2014
VN-0010000108791
143510.51
7/21/2014
028493217822
7/21/2014
VN-0010460029032
141854.71
7/21/2014
028493217823
7/20/2014
VN-0010070059858
102233.56
7/20/2014
028493217938
7/22/2014
VN-0010000273841
115415.65
7/22/2014
028493218094
8/3/2014
VN-0010270141534
127599.74
8/3/2014
028493218180
8/9/2014
VN-0010000430933
101012.03
8/9/2014
028493218187
8/9/2014
VN-0010000282973
149550.22
8/9/2014
028493218224
8/13/2014
VN-0010000270884
148361.72
8/13/2014
028493218231
8/11/2014
VN-0010070344773
104780.65
8/11/2014
028493218275
8/16/2014
VN-0010090168632
118950.76
8/16/2014
028493218346
8/16/2014
VN-0010380323702
273698.86
8/16/2014
028493218353
8/19/2014
VN-0010290049720
143706.72
8/19/2014
028493218354
8/17/2014
VN-0010000268420
132859.03
8/17/2014
028493218453
8/24/2014
VN-0010000233061
119706.99
8/24/2014
028493218549
9/1/2014
VN-0010070241895
142498.05
9/1/2014
028493218555
9/1/2014
VN-0010000249805
182623.85
9/1/2014
028493218556
9/2/2014
VN-0010150116435
145616.81
9/2/2014
028493218579
9/2/2014
VN-0010000207185
113427.53
9/2/2014
12-37
Integrated Case Application
PINNACLE MANUFACTURING―PART IV
Following are control risk matrices and related notes that are used to direct a
discussion of the requirements of the case. It should be understood that
single right answer.
Computer-prepared matrices using Excel (P1237.xls) are contained on
the text web site. They are essentially the same as the matrices on the next
two pages.
12-37 (continued)
PINNACLE MANUFACTURING - Part IV
Control Risk Matrix – Acquisitions
Transaction-Related
Audit Objective
Internal
Controls
Recorded
acquisitions
and services
received
(occurrence).
Existing
acquisition
actions are
recorded
(completeness).
Recorded
acquisition
transactions
the correct
amounts
(accuracy).
Recorded
acquisition
transactions are
properly
included in the
master files, and
summarized
(posting and
summarization).
Acquisition
transactions
classified
(classifica-
tion).
Acquisition
transactions
are recorded
correct
dates
(timing).
1. Required use of PO and
receiving report with check of
completeness
C
2. Proper approval
C
C
3. Segregation of functions
C
4. Cancellation of documents
C
5. Prenumbering of documents
with accounting for sequence
C
6. Internal verification of
documents/records
C
C
C
C
C
7. Use of chart of accounts
C
8. Procedures requiring prompt
processing
C
9. Monthly reconciliation of
A/P master file with general
ledger
C
Assessed control risk
Low
Low
Low
Low
Low
Low
12-38
Copyright © 2017 Pearson Education, Inc.
12-37 (continued)
PINNACLE MANUFACTURING - Part IV
Control Matrix - Cash Disbursements
Transaction-Related
Audit Objectives
Internal
Controls
Recorded cash
disbursements
are for goods
and services
received
(occurrence).
Existing cash
disbursement
recorded
(completeness).
Recorded cash
disbursement
transactions are
correct amounts
(accuracy).
Recorded cash
disbursement
transactions are
properly included
in the master file
and are properly
(posting and
summarization).
Cash
disbursement
transactions
classified
(classification).
Cash
disbursement
transactions
on the correct
dates (timing).
1. Segregation of functions
C
2. Review of support, signing of
checks by authorized person
C
3. Prenumbered checks; accounted
for
C
4. Use of chart of accounts
C
5. Procedures for prompt recording
C
6. Monthly reconciliation of A/P
master file with G/L
C
Deficiencies
1. Lack of an independent bank
reconciliation (Done by Treasurer)
D
D
2. Lack of internal verification of
documentation package by cash
disbursements clerk.
D
D
D
3. Lack of internal verification of key
entry into cash disbursements
file.
D
D
D
Assessed control risk
Medium
Medium
High
Low
Low
Low
12-39
Copyright © 2017 Pearson Education, Inc.
12-40
12-37 (continued)
Notes to 12-37, Part IV
cycle,
(b) obtain controls from a flowchart description,
(c) relate controls to objectives,
(d) evaluate a set of controls as a system.
substantive tests of details of balances and/or transactions.
Controls for cash disbursements are not nearly as good, given the
of documents)?
