Case Study 4 Acc 522 Post University Assessing C

Case Study 4 – Assessing Control Risk

1. Read Case # 4
2. Create a flowchart and write a memo – Abernethy and Chapman has a policy of documenting all systems either through a memo (e.g. narrative) or a flowchart for the staff to achieve a more effective and efficient understanding of the design of each system. As a member of the audit team, you are tasked with the following:
   1. Using the memo explanation of the Revenue Recognition section of the Revenue and Cash Receipts Cycle (Exhibit 4-3), prepare a flowchart to provide a graphic display of this system. Use the flowchart symbols that appear in Exhibit 4-2.
   2. Analyze and write a memo to explain the flowchart of the Cash Receipt procedures (Exhibit 4-4)
   3. Use the template provided in Unit 4 to complete this assignment
3. Now that you have completed the memo and the flowchart, the next task is to prepare a preliminary analysis of the internal control policies and procedures found in the system. As an auditor, you will be searching for weaknesses within the structure of the system as well as strengths that could reduce control risk.
   1. Abernethy and Chapman utilizes an internal control questionnaire to evaluate the system (Exhibit 4-5). Complete this questionnaire based on the flowchart in Exhibit 4-4 which represents the Cash Receipts section of the Revenue and Cash Receipts cycle.
   2. Abernethy and Chapman use a Control Matrix to establish the existence of controls related to each audit objective. Complete the Control Risk Matrix in Exhibit 4-6. Note any internal control weaknesses or strengths that may be indicated. The 1^st item is complete to serve as a guide for you.
4. Rogers has stated that he wants the audit firm to help improve Lakeside’s accounting systems. Exhibit 4-3 outlines the revenue recognition procedures currently in place with distributorship sales. List the improvements that could be made to the system.