You are the audit Senior, managing an interim visit to a new client in the emerging computer software industry.
You are the audit Senior, managing an interim visit to a new client in the emerging computer software industry. Since this is the first year of the audit engagement of Techfi Pty Ltd (Techfi), you have limited knowledge of the client’s internal control environment. Whilst the audit work papers from the previous auditor have been provided, the files are incomplete, and information appears to be missing.
Based on discussions held with several key management personnel, the following points and issues were identified:
- To promote knowledge sharing and open communication, the company has an “open access” data system. All employees have full user access to all of Techfi’s applications and drives without any restrictions. Apart from a log-in password, Techfi employees are able to access different databases, including those which are not directly relevant to their job function and everyday responsibilities, such as the accounting and financial reporting modules.
- The current Assistant Accountant has full responsibility for Accounts Receivable, Accounts Payable, Payroll and month-end reporting. The Assistant Accountant is a strong personality. She has over 10 years of experience and claims to be very happy with the amount of responsibility given to her. According to her direct manager, the Financial Accountant, she never takes holidays and requires minimal supervision. Having her in the role saves Techfi salary and wages expenses because the Financial Accountant says she can do the work of three employees.
- Techfi maintains no hard-copy record keeping. The company has moved to a fully paperless system, reducing its paper waste and on-site storage requirements. The IT Manager claims that all databases are protected through strong firewalls and regular anti-virus software upgrades to prevent system breaches. As a result, time and money is saved because back-ups are not required, and all reports are sent through the email system or retained in soft copy versions available to all employees in share drives or on personal USBs.
Required:
For each case (i) – (iii) identified above, determine the key risk(s) and outline control measures that describe what Techfi Pty Ltd can do to address the key risks identified.
Complete your answers in the following table
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Issue # |
Risk(s) |
Control Recommendations |
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