ACCA F8 - Audit and Assurance Revision Kit 2016

Deficiency Implication Recommendation
The purchase ledger clerk
does not use any application
controls over the input of
purchase invoices to the
ledger.
The purchase ledger clerk
posts the purchase ledger to
the general ledger manually.
Deposit accounts are not
reconciled on a timely basis,
only every two months.
Payment to suppliers is
delayed for as long as
possible.
The finance director
authorises the total amount of
the payment list, without a
review of the detail.
The lack of application controls
increases the risk of errors
being made during the input of
invoices to the ledger. This
could result in misstatements in
the financial statements and
also errors in amounts paid to
suppliers and a consequent loss
of goodwill.
Errors may be made during the
posting process as it is done
manually.
Unreconciled differences may
go unnoticed for a long period
of time. The length of time
between reconciliations may
also increase the risk of fraud
being perpetrated by
employees.
Prompt payment discounts are
not taken advantage of and
suppliers may not look
favourably on the company if it
takes too long to pay and
therefore may refuse credit later
on, if the company is viewed as
unreliable.
Unauthorised amounts may be
missed as the finance director
does not see the detail of the
payments on the list. This opens
the company up to the risk of
fraud and error.
There should be some application
controls in place over the input of
invoices to the system, such as control
totals and document totals.
The system should be set up so that the
purchase ledger is posted automatically
to the general ledger. A reconciliation
between the two should be performed
each week by the purchase ledger clerk
and this should be signed off and dated
as reviewed by the finance director.
Deposit accounts should be reconciled
at the same time as the current account.
All reconciliations should be signed off
and dated to evidence review by a more
senior person, with all differences fully
investigated and resolved on a timely
basis.
Suppliers should be paid as soon as
possible to take advantage of early
settlement discounts and to promote
and maintain good relations with
suppliers.
The finance director should review the
detailed list of payments and query any
amounts and supplier names that
appear erroneous or suspicious. The
review should be evidenced by the
finance director’s signature and date.
(Note: only four deficiencies were required.)
(c)
Application controls
Daily reconciliation between purchase ledger and general ledger by the purchase ledger clerk, which should
be reviewed and signed and dated as reviewed by the finance director
Control totals agreeing the amount per purchase day book, purchase ledger and general ledger totals
Agreement of amounts on purchase invoices back to the purchase orders
Document counts of the number of invoices entered onto the system
One-for-one checking of output from the system against the original invoices to ensure completeness and
accuracy of input
Mock exam 1: answers 203