The Green N Clean Recycling Services (GCRS) receives cash payment for services, fees and recycled products. Cash is defined as payments made in liquid cash by debit or credit cards, and by cheques. Five GCRS are located within the state which covers many hundreds of kilometers, the largest of which also acts as the headquarters. The sites have the following controls in place to assure proper cash receipt, handling, depositing and recording. i. Payments are deposited within 24 hours ii. Payments are recorded within five working days iii. Revenue reports are prepared for all bank deposits iv. Financial institutions are chosen based on their proximity to the Station Wolf & Grang Public Accountants is the new auditor for GCRS. Two months before the financial year end, Wolf & Grang performed an interim audit to evaluate the operational effectiveness of the internal controls at the GCRS. The audit consisted of the following steps: i. Interviews with management and staff, at headquarters and in the other locations; and an examination and analysis of site statistics ii. The selection of three sites that each had different operating environments: Tankaloo, Triple Bend and Riverdale iii. Observation of physical controls and processes by conducting a walk-through of the facilities, reviewing manual and automated records of cash collected, reviewing monitoring controls and by talking to site staff. Results of the audit revealed the following deviations: i. Weaknesses regarding supervision of employees ii. Lack of segregation of duties and safeguarding of monetary assets iii. Outdated policies and procedures at operational units iv. Lack of management review of operations to detect and correct control deficiencies v. Lack of communication by management of their monitoring expectations, such that some offices did not know where to send their quarterly review reports REQUIRED: a. With reference to the deviations identified by the auditor, discuss in detail two potential risks that are inherent in GCRS. b. Outline and explain two other control measures (in addition to the five listed) that should be in place to ensure that cash is not mishandled. c. The deviations identified reveal that there is likely to be high control risks. In addition to the four audit procedures listed, explain in detail four other substantive audit procedures the auditor might employ in auditing the financial statements of GCRS.
The Green N Clean Recycling Services (GCRS) receives cash payment for services, fees and recycled products. Cash is defined as payments made in liquid cash by debit or credit cards, and by cheques. Five GCRS are located within the state which covers many hundreds of kilometers, the largest of which also acts as the headquarters. The sites have the following controls in place to assure proper cash receipt, handling, depositing and recording.
i. Payments are deposited within 24 hours
ii. Payments are recorded within five working days
iii. Revenue reports are prepared for all bank deposits
iv. Financial institutions are chosen based on their proximity to the Station
Wolf & Grang Public Accountants is the new auditor for GCRS. Two months before the financial year end, Wolf & Grang performed an interim audit to evaluate the operational effectiveness of the internal controls at the GCRS. The audit consisted of the following steps:
i. Interviews with management and staff, at headquarters and in the other locations; and an examination and analysis of site statistics
ii. The selection of three sites that each had different operating environments: Tankaloo, Triple Bend and Riverdale
iii. Observation of physical controls and processes by conducting a walk-through of the facilities, reviewing manual and automated records of cash collected, reviewing monitoring controls and by talking to site staff.
Results of the audit revealed the following deviations:
i. Weaknesses regarding supervision of employees
ii. Lack of segregation of duties and safeguarding of monetary assets
iii. Outdated policies and procedures at operational units
iv. Lack of management review of operations to detect and correct control deficiencies
v. Lack of communication by management of their monitoring expectations, such that some offices did not know where to send their quarterly review reports
REQUIRED:
a. With reference to the deviations identified by the auditor, discuss in detail two potential risks that are inherent in GCRS.
b. Outline and explain two other control measures (in addition to the five listed) that should be in place to ensure that cash is not mishandled.
c. The deviations identified reveal that there is likely to be high control risks. In addition to the four
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