GUIDE 1

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EXERCISE: SEGREGATION OF DUTIES

Our understanding of controls of the accounting process (i.e., the significant flows of
transactions) should include the policies and procedures established by management to
maintain an appropriate level of segregation of duties.

To achieve an appropriate level of segregation of duties, no one department or individual

should perform more than one of the following functions: a) initiating transactions, b)
authorizing transactions, c) recording transactions, and d) maintaining custody over assets.

The lack of segregation of duties may create a situation specifically susceptible to intentional
misrepresentation. As experienced Assistants, it is important to be aware of how duties
should be segregated to be able to recognize inadequate segregation of duties.

Requirements

1. Read the information provided in the case study below.

2. Identify where duties are incompatible and should be segregated.

3. You have 10 minutes to complete the requirements.

Case Study

The payroll clerk at Wilman Inc. (Wilman) is aware that payroll checks are distributed and
automatic debits are posted every other Friday beginning with the second Friday of the new
fiscal year. Wilmans fiscal year begins on January 1. Based on this knowledge, the payroll
clerk initiates the processing of payroll every Monday before the cash is to be disbursed. The
payroll clerk initiates the process by running a report from the system for the prior two weeks
worked.

El empleado de nmina en Wilman. ("Wilman") es consciente que los pagos de nmina son
distribuidas y dbitos automticos son contabilizados el otro viernes que comienza con el
segundo el viernes del nuevo ao fiscal. El ao fiscal de Wilman comienza el 1 de enero.
Basado en este conocimiento, el empleado de nmina inicia el tratamiento de nmina cada
lunes antes de que el dinero efectivo sea desembolsado. El empleado de nmina inicia el
proceso controlando un informe del sistema durante las dos semanas previas trabaj.

The payroll clerk uses the system-generated reports to prepare the payroll checks. After the
initiation and preparation of the checks, and the creation of automatic debit reports for the
bank, the payroll clerk forwards this information to the Payroll Manager for approval.
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El empleado de nmina usa los informes generados por sistema para preparar los
comprobantes de nmina. Despus de que la iniciacin y la preparacin de los comprobantes,
y la creacin de dbito automtico a ser enviada para el banco, el empleado de nmina pasa
esta informacin al Gerente de Nmina para la aprobacin.

The Payroll Manager compares the totals of the reports and the prior period payroll
summaries to identify significant problems. If an issue arises, the Payroll Manager addresses
it and once resolved, sends the reports to the Human Resources (HR) Manager for her
approval and signature on the physical checks. The HR Manager reviews the documents and
initiates an action via the HRPAY application system that will automatically generate the
checks with her electronic signature. Additionally, her approval also sends an automated
message to the bank to automatically deposit the funds into the prearranged accounts.

El Gerente de Nmina compara los totales de los informes y los resmenes de nmina de
perodo previos para identificar problemas significativos. Si un asunto surge, el Gerente de
Nmina lo dirige y una vez resuelto, enva los informes a los Recursos Humanos (HR) el
Gerente para su aprobacin y firma de las comprobacines fsicas. El Gerente HR revisa los
documentos e inicia una accin va el sistema HRPAY de aplicacin que automticamente
generar las comprobacines con su firma electrnica. Adems, su aprobacin tambin enva
un mensaje automatizado al banco para automticamente depositar los fondos en las cuentas
arregladas de antemano.

Both the HR Manager and Payroll Manager have been granted access privileges within the
HRPAY application system for approving payments by physical checks and direct deposit of
funds.

El Gerente HR y el Gerente de Nmina han tenido privilegios de acceso dentro del sistema
HRPAY de aplicacin para aprobar pagos por comprobacines fsicas y dirigen el depsito de
fondos.

After every payroll period, the payroll clerk prepares a reconciliation of any discrepancies or
issues that arise during the delivery. The payroll clerk has the authority to resolve issues and
issue automatic debits or manual checks to reconcile any issues. Because of this
responsibility, the payroll clerk has also been granted access privileges within the HRPAY
application system for approving payments by physical checks.

Despus de cada perodo de nmina, el empleado de nmina prepara una reconciliacin de

cualquier discrepancia o publicaciones que surgen durante la entrega. El empleado de nmina
tiene la autoridad para resolver asuntos y ejecutando dbitos automticos o comprobantes
manuales para reconciliar cualquier asunto. A causa de esta responsabilidad, tambin han
concedido al empleado de nmina privilegios de acceso dentro del sistema HRPAY de
aplicacin para aprobar pagos por comprobacines fsicas.

Finally, the payroll clerk receives information from the HR employee relations department
regarding new employees and their salaries. All employees in both the Payroll and HR
employee relations department have been granted access within the HRPAY application
system to create, view, modify, and delete employee information.
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Finalmente, el empleado de nmina recibe la informacin del departamento de relaciones de
empleado HR en cuanto a nuevos empleados y sus salarios. Han concedido a todos los
empleados tanto en la Nmina como en el departamento de relaciones de empleado HR el
acceso dentro del sistema HRPAY de aplicacin para crear, ver, modificar, y suprimir la
informacin de empleado.

The payroll clerk ensures that all new employees are properly recorded, and then the clerk
double-checks to ensure that the list of new employees is consistent with the system. This
computer-generated report is forwarded to the Payroll Manager for review.

El empleado de nmina asegura que todos los nuevos empleados son correctamente
registrados, y luego revisa detalladamente el empleado para asegurar que la lista de nuevos
empleados es compatible con el sistema. Este informe generado por ordenador es expedido al
Gerente de Nmina para la revisin.

The payroll clerk is responsible for maintaining the payroll system, its content, and its
integrity. The Payroll Manager closely supervises the payroll clerk. The HR Manager
supervises the Payroll Manager.

El empleado de nmina es responsable de mantener el sistema de nmina, su contenido, y su

integridad. El Gerente de Nmina estrechamente supervisa al empleado de nmina. El
Gerente HR supervisa al Gerente de Nmina.
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EXERCISE: IDENTIFY CONTROLS

As part of understanding of controls, we identify controls that we believe will provide

reasonable assurance of achieving the control objectives related to the reliability of financial
reporting. As an experienced assistant, you may be asked to identify and evaluate controls
for a specific significant flow of transactions and/or its sub-element.

Requirements

1. Working in your small groups, complete the following:

a. Review the descriptions of the tasks within the Purchasing and the Processing
Account Payables sub-elements of Expenditure Significant Flow of Transactions as
provided below and identify controls the entity has in place.

b. For each control you identify, explain what the control is, and link it to the control
objective it was intended to achieve.

c. Link the control objectives to potential errors at the account balance level.

4. Record your responses on a flipchart with the following column headings.

Task Name Control Control Account Dependant

Objective Balance/Potential on General
Error Computer
Controls
(Y/N)

5. You may use the Internal Control Quick Reference card when completing this exercise.

6. You have 20 minutes to complete the requirements of the exercise.

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EXPENDITURE SIGNIFICANT FLOW OF TRANSACTIONS - PURCHASING

Cancel original Evaluate outstanding

purchase order purchase orders
(PO). (PO) to determine
proper accounting
treatment.

No

From Create Create purchase Process Transmit purchase

and Maintain Yes
order (PO). Appro purchase orders order (PO) to
Purchase ve (PO) supplier.
Requisitions PO?
A

Obtain approval for

the modified PO Modify purchase No
order (PO). Supplier
confirms and
accepts the
PO/modifications
?

Yes

To Receive Materials
and Services
Task Name Task Description

Create purchase order Manually enter a purchase order into the system, where orders are automatically assigned a sequential
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Task Name Task Description

purchase order number. Include the material description, material group, account assignment, quantity,
price, and delivery date. Purchase orders may include single or multiple items and may encompass single
or multiple deliveries.
Manualmente ingresa una orden de compra en el sistema, donde las rdenes automticamente son
asignadas un nmero de orden de compra secuencial. Incluye la descripcin del material, el grupo del
material, asignacin de la cuenta, la cantidad, el precio, y la fecha de entrega. Los rdenes de compra
pueden incluir artculos solos o mltiples y pueden abarcar entregas solas o mltiples.
Approve purchase order The purchase order approval matrix has been configured into the system. Once a purchase order is created
in the system, an email alert is automatically sent to the relevant manager, based on the predefined
authorization limits, advising them that a purchase order is awaiting their approval. Managers approve the
order by logging on to the system. All routine purchases for amounts below $25,000 are approved by the
Purchasing Supervisor and purchases greater than $25,000 and less than $100,000 are approved by the
Purchasing Manager. Unusual purchases (such as capital outlays or standing orders) and all purchases that
exceed $100,000 require approval by the Chief Financial Officer (CFO) or the Chief Executive Officer
(CEO). Board approval is required for specified types of purchases and such approval is appropriately
documented. Management reviews reports detailing overrides of established purchase order prices, terms,
and conditions and approves these overrides.
La aprobacin de orden de compra ha sido configurada en el sistema. Una vez que un orden de compra es
creado en el sistema, una alarma de correo electrnico automticamente es enviada al gerente relevante,
basado en los lmites de autorizacin predefinidos, advirtiendo que una orden de compra espera su
aprobacin. Los gerentes aprueban la orden entrando al sistema. Todas las compras rutinarias para
cantidades por debajo de 25,000 dlares son aprobadas por el Supervisor Adquisitivo y compras mayores
que 25,000 dlares y menos de 100,000 dlares son aprobados por el Gerente Adquisitivo. Compras
inusuales (como salidas de capital o pedidos importantes) y todas las compras que exceden100,000 dlares
requieren la aprobacin por el Director financiero (CFO) o el Oficial superior (el presidente). La Junta
Directiva es requerida para la aprobacin de tipos especificados de compras y tal aprobacin es
apropiadamente documentada. La Direccin revida los reportes detallados de precios que pasan los
establecidos en las ordenes de compra, trminos(condiciones), y condiciones y los aprueba.
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Task Name Task Description

Process purchase order Purchase order data, (such as name, part number, quantity, description, and price of the goods or services
ordered) is edited and validated prior to being processed. Identified errors are corrected promptly. The
purchase order entry data is compared to source documents by individuals who are independent of the
purchase order entry process. Any identified errors are corrected promptly.
Los datos de la orden de compra, (como el nombre, el nmero de parte, la cantidad, la descripcin, y el
precio de los bienes(las mercancas) o servicios ordenados(pedidos)) son corregidos y validados antes del
tratamiento. Los errores identificados son corregidos puntualmente. Los datos de entrada de orden de
compra son comparados a documentos de la fuente por los individuos que son independientes del proceso
de entrada de orden de compra. Cualquier error identificado es corregido puntualmente.
Transmit purchase order Once the purchase order has been approved in the system, the purchase order is sent to the supplier by
to supplier mail, fax, or secure electronic data interchange (EDI). The suppliers representative will respond
confirming receipt and acceptance of the order. Any confirmation received whether by phone or in writing
will be recorded in the system as notes to the purchase order.
Una vez que la orden de compra ha sido aprobado en el sistema, el orden de compra es enviado al
proveedor por el correo, fax, o el intercambio de datos seguro electrnico (EDI). El representante del
proveedor responder confirmando el recibo y la aceptacin de la orden(del pedido). Cualquier
confirmacin recibi o por telfono o por escrito ser registrada en el sistema como apuntes al orden de
compra.
Evaluate outstanding The accounting department evaluates long outstanding purchase orders identified by a report generated
purchase orders to from the system and determines when to record a liability. For items shipped F.O.B shipping point, the
determine proper legal transfer of title from the supplier to the company occurs when the item leaves the suppliers shipping
accounting treatment dock.
El departamento de contabilidad evala las rdenes de compra pendientes o que llevan mucho tiempo,
identificadas en un informe generado del sistema y determina cuando registrar una obligacin. Para los
artculos embarcaron(transportaron) F.O.B que embarca(transporta) el punto, la transferencia legal de ttulo
del proveedor a la empresa ocurre cuando el artculo abandona(deja) el muelle de embarque(transporte) del
proveedor.
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Task Name Task Description

Modify purchase order Modifications reflect such items as: quantity, date, or price adjustments; lot size delivery quantities; remit
to addresses, or addendums from reconciled communication between customer and supplier. The
application system prevents unusual purchase order adjustments or adjustments in excess of approved
limits.

The only time a modification can be made to the purchase order is when the purchase order has gone to the
supplier and has been returned for changes to be made. In this case, the purchase order will once again go
through the approval process and then through processing the purchase order.

If the original supplier cannot supply goods or services according to the modified purchase order for any
reason (i.e., price, availability), the original purchase order is cancelled and the process returns to Create
Purchase Order.

Las modificaciones reflejan tales artculos como: cantidad, fecha, o ajustes de precios; cantidades de
entrega de tamao de parte; remita a direcciones, o apndices de la comunicacin reconciliada entre el
cliente y el proveedor. El sistema de aplicacin previene ajustes de orden de compra inslitos o ajustes
superior a lmites aprobados.

Una sola ves se puede modificar la orden de compra es cuando el orden de compra ha ido al proveedor y ha
sido devuelto para cambios para ser hechos. En este caso, el orden de compra otra vez examinar el
proceso de aprobacin y luego por el tratamiento del orden de compra.

Si el proveedor original no puede suministrar bienes(mercancas) o servicios segn el orden de compra

modificado para ninguna razn (p. ej., el precio, la disponibilidad), el orden de compra original es
cancelado y las vueltas de proceso para " Crear el Orden de compra. "

Cancel original purchase The original purchase order is cancelled if (1) the purchase order is not approved; or (2) if a new supplier is
order selected or if item is no longer required.

When the order is cancelled, it is recorded in the system in order to preserve the serial order and the reason
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Task Name Task Description

for cancellation is recorded by way of a memo.

Note: If the item is already received, reverse the receipt before canceling the purchase order.

El orden de compra original es cancelado si (1) el orden de compra no es aprobado; (o 2) si un nuevo

proveedor es seleccionado o si ms requieren el artculo.

Cuando la orden(el pedido) es cancelada, es registrado en el sistema para conservar la orden(el pedido)
sucesiva y la razn de la cancelacin es registrada por va de una nota.

Note: Si el artculo ya es recibido, el revs el recibo antes de la cancelacin del orden de compra.
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EXERCISE: DESIGNING THE APPROPRIATE TECHNIQUE

To evaluate the design of a control and to determine its implementation, we need to perform
inquiries of management and other entity personnel, in combination with one or more of the
following audit procedures:

Observing the application of specific controls.

Inspection of documents and reports.

Tracing transactions through the information system (including accounting system)

relevant to financial reporting from initiation of the transaction to the reporting in the
financial statements (e.g., by performing walkthroughs).

The choice between these techniques depends on the nature of the control itself. As an
experienced Assistant, you are expected to know which technique is more appropriate to use
for evaluating the design of a control and determining whether it has been implemented. You
are also expected to be able to plan how you intend to practically apply the technique you
have chosen.

Requirements

1. For scenario(s) below assigned to your group by the facilitator, determine the most
appropriate technique that can be used to support our inquiries of management and others
within the entity when evaluating the design of the control and determining whether the
control has been implemented.

2. Once you have determined the most appropriate technique, plan out how you would
practically implement the procedure by considering:

a. Who will you speak to and what questions will you ask?

b. Which procedure would you use to support your inquiries observing performance,
inspecting documents, or tracing transactions?

c. What supporting information or documentation will you seek from the management?

d. What are the details that you will include in the working papers to document the
results of the selected procedure?

3. Be prepared to discuss your solution with other groups.

4. Document your solution on a flipchart.

5. You have 10 minutes to complete the requirement

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Scenarios

1. Our objective is to evaluate the design of controls in place at XYZ Inc. when hiring a new
employee and to determine whether the controls have been implemented. We are
primarily concerned as to whether additions to the payroll master files represent valid
employees and that all new employees are added to the payroll master files.

2. Our objective is to evaluate the design of controls related to the counting of inventory and
to determine whether the controls have been implemented.

3. Our objective is to evaluate the design of the following control and to determine whether
it has been implemented. Management reviews and approves all adjustments to
inventory prices or quantities in order to ensure that any of these adjustments are
recorded accurately.

1. Nuestro objetivo es evaluar el diseo de controles en el lugar en la S.A. XYZ. Cuando

incorporan a un nuevo empleado y determinar si los controles han sido puestos en
prctica. Principalmente estamos preocupados en cuanto a si las adiciones a los archivos
principales de nmina representan a empleados vlidos y que todos los nuevos empleados
son aadidos a los archivos principales de nmina.

2. Nuestro objetivo es evaluar el diseo de controles relacionados con el conteo de

inventario y determinar si los controles han sido puestos en prctica.

3. Nuestro objetivo es evaluar el diseo del control siguiente y determinar si ha sido

puesto en prctica. La direccin revisa y aprueba todos los ajustes a precios de inventario
o cantidades para asegurar que cualquiera de estos ajustes son registrados con exactitud.