From the viewpoint of a researcher, the controls that need to be tested must incorporate as much information from external parties as possible. This specially applies to the case of Office Supplies Ltd, wherein most of the documents such as sales orders, invoices, bill of lading etc involve manual entries and are subject to human error. A possible road map to follow when testing for controls for Office Supplies Ltd is as follows:
-Gather evidence for the proper division of duties between the units as depicted in the flowchart. The responsibilities should be separate in terms of hierarchy. Moreover, extent of supervisory control should be looked into. This would ensure accountability and hence effectiveness of internal controls.
-Since invoices, sales order etc are prepared manually, a separate check should be taken to ensure that all documents are properly numbered and in order. Hence, archiving by ‘customer’ only may not be effective for such purposes, and a separate record keeping mechanism should be in place to ensure that all numbered documents are in place.
-A sample of transactions would be selected from each month to ensure uniformity in practices all year round (My CA Site 2009). It may happen that diligence required by the personnel responsible for the relevant activities may be lacking based on motivation levels, or seasonality, for example the Christmas season. The sample of transactions should be reviewed to deduce whether the data entered has been verified by a second party. ...