Solution The communication plan for the control deficiencies identified during

Solution the communication plan for the control

This preview shows page 200 - 202 out of 284 pages.

Solution The communication plan for the control deficiencies identified during the audit of Smithfield’s 30 June 20X3 financial statements is as follows: Communication plan for the control deficiencies Item Control deficiency Required to communicate? To whom Form Content 1. Lack of review of balance sheet reconciliations The auditor’s professional judgement is required to determine whether this issue warrants management’s attention. It is not likely to be a significant deficiency given that further samples tested show that there was evidence of review (ISA 265 para. 10(b)) Management Given the control deficiency has arisen at the financial controller level you would need to communicate this to the CFO (ISA 265 para. 10(b)) Oral communication would be sufficient; however, it could be included in written communication with other deficiencies (ISA 265 para. A23) A small number of reconciliations did not indicate review by the financial controller, which might lead to errors not being identified or corrected
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Chartered Accountants Program Audit & Assurance Unit 14 – Activities and solutions Page 14-11 ACT Communication plan for the control deficiencies Item Control deficiency Required to communicate? To whom Form Content 2. Lack of segregation of duties in accounts payable Yes – this may constitute a significant deficiency (particularly when considered together with Item 3, which lends weight to the conclusion that a lack of management oversight exists in the finance function), as there is the likelihood of material misstatements arising as a result, including a susceptibility to fraud (ISA 265 paras A6 and A7) Those charged with governance (ISA 265 para. 9) Also management (as there is no reason to suggest that this would be inappropriate) (ISA 265 para. 10(a)) In writing, as required by ISA 265 paras 9 and 10(a) There is a lack of segregation of duties in the accounts payable function which could expose Smithfield to errors or fraud as a result of inaccurate or fictitious creditors being created in the system 3. Lack of approval in payroll Yes – it is likely this would constitute a significant deficiency Misstatements have already arisen, there is a significant volume of transactions and there is the potential for fraud (ISA 265 paras A6 and A7) Those charged with governance (ISA 265 para. 9) Also management (as there is no reason to suggest that this would be inappropriate) (ISA 265 para. 10(a)) In writing, as required by ISA 265 paras 9 and 10(a) There is a lack of review and management oversight regarding the payroll function. As a result, errors have occurred in payments to employees. There is also the possibility that this deficiency exposes Smithfield to fraud 4. Weak access controls in IT system Yes – this would likely constitute a significant deficiency This general IT control deficiency has not been addressed by Smithfield, which leaves the organisation exposed to loss or fraud. It would have been expected that this control deficiency had been addressed in the prior year (ISA 265 paras A6 and A7) Those charged
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