Question 1:
a) Define the term control environment? Why is it significant to an entity?
b) Why must an internal control system be monitored over time?
Question 2: John Stevenson Auditing Consultancy Ltd. is approached by its client who has just re-organized his medium-sized manufacturing company to make it more structured by giving responsibilities in related regions to one employee. The supervisor for customers is responsible for both collection of accounts receivable and maintenance of accounts receivable records. The inventory coordinator is responsible for receiving, purchasing and storing inventory. The payroll agent handles all payroll matters comprising personnel records, keeping time cards, preparations of payroll and distribution of the payroll checks.
Required:
Consider each of these latest positions and describe the implications of their duties on the internal control system. Moreover, describe what problems could occur if these positions are made.
Question 3:
a) Describe what is meant by an operational or performance review.
b) Describe in brief the general purposes of carrying out an operational review.
Question 4: Operational or performance review procedures embrace the concept of conducting operations for economy, effectiveness and efficiency.
Define and describe the terms economy, efficiency and effectiveness.