Items 1 through 6 are questions typically found in a standardinternal control questionnaire used by auditors to obtain an understanding of internalcontrol for notes payable. In using the questionnaire for a client, a “yes” response indicatesa possible internal control, whereas a “no” indicates a potential deficiency.1. Are liabilities for notes payable incurred only after written authorization by a propercompany official?2. Are paid notes cancelled and retained in the company files?3. Is a notes payable master file maintained?4. Is a periodic reconciliation made of the notes payable master file with the actualnotes outstanding by an individual who does not maintain the master file?5. Is the individual who maintains the notes payable master file someone other thanthe person who approves the issue of new notes or handles cash?6. Are interest expense and accrued interest recomputed periodically by an individualwho does not record interest transactions?a. For each of the preceding questions, state the purpose of the control.b. For each of the preceding questions, identify the type of financial statement misstatement that can occur if the control were not in effect.c. For each of the potential misstatements in part b., list an audit procedure that canbe used to determine whether a material misstatement exists.
Items 1 through 6 are questions typically found in a standard
internal control questionnaire used by auditors to obtain an understanding of internal
control for notes payable. In using the questionnaire for a client, a “yes” response indicates
a possible internal control, whereas a “no” indicates a potential deficiency.
1. Are liabilities for notes payable incurred only after written authorization by a proper
company official?
2. Are paid notes cancelled and retained in the company files?
3. Is a notes payable master file maintained?
4. Is a periodic reconciliation made of the notes payable master file with the actual
notes outstanding by an individual who does not maintain the master file?
5. Is the individual who maintains the notes payable master file someone other than
the person who approves the issue of new notes or handles cash?
6. Are interest expense and accrued interest recomputed periodically by an individual
who does not record interest transactions?
a. For each of the preceding questions, state the purpose of the control.
b. For each of the preceding questions, identify the type of financial statement misstatement that can occur if the control were not in effect.
c. For each of the potential misstatements in part b., list an
be used to determine whether a material misstatement exists.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
