1.

Control: Unapplied cash ageing report is periodically reviewed and reasons for aged items are
identified and documented.

a. Risk being addressed:

 Improper handling of unapplied cash: Unapplied cash represents unidentified receipts that
haven't been associated with invoices or other liabilities. Untimely investigation and resolution
of these items can increase the risk of:

o Fraud: Unapplied cash can be misappropriated by employees if not properly controlled

and monitored.

o Errors: Mistakes in processing payments or recording transactions can lead to unapplied

cash items.

o Inefficiencies: Delays in resolving unapplied cash can tie up resources and impact cash
flow.

b. Data request:

 Unapplied cash ageing report: This report should detail all unapplied cash receipts, including:

o Transaction date and amount

o Payment method

o Source of funds (e.g., customer name, bank account)

o Ageing analysis (e.g., number of days outstanding)

o Reason for being unapplied (if identified)

 Supporting documentation: Obtain copies of supporting documents for a sample of aged

items, such as:

o Bank statements

o Customer remittance advices

o Payment processing logs

o Investigation records

c. Test steps:

Design testing:

1. Review control policies and procedures:

o Ensure a documented procedure exists for reviewing the unapplied cash ageing report.

o Verify the procedure defines frequency of review, roles and responsibilities, and criteria
for investigating aged items.
 o Confirm clear guidelines exist for documenting reasons for unapplied cash.

2. Evaluate adequacy of controls:

o Assess if the review frequency is appropriate based on the volume and risk of unapplied
cash.

o Verify personnel conducting the review have the necessary skills and experience.

o Confirm documented reasons for aged items are clear, concise, and provide sufficient
explanation.

Effectiveness testing:

1. Select a sample of aged items:

o Choose items from different age categories (e.g., new, moderately aged, significantly
aged).

o Include a mix of high-value and low-value transactions.

2. Trace sample items:

o For each selected item, review supporting documentation to verify its existence and
accuracy.

o Trace the investigation process (if any) to ensure it was conducted thoroughly and
documented appropriately.

o Confirm the documented reason for the aged item aligns with the supporting evidence.

3. Re-perform procedures:

o Select a subset of the sample and re-perform the review and investigation steps
independently.

o Compare your results with the original reviewer's findings to assess consistency and
accuracy.

Supporting documents and items:

 Unapplied cash ageing report

 Bank statements

 Customer remittance advices

 Payment processing logs

 Investigation records (e.g., emails, notes, memos)

 Review notes and documentation

2.Control: Monthly depreciation report review and sign-off by Finance Manager

Risk Addressed: Inaccurate depreciation expense leading to misstated financial results and potential tax
implications.

Data Request:

Depreciation report for the current month

Depreciation reports for the previous month(s)

Fixed asset register

Depreciation policy document

Tax regulations

Design Testing Steps:

1. Review the depreciation policy and ensure it aligns with accounting standards and tax
regulations.

2. Verify that the depreciation method used in the report is consistent with the policy.

3. Test the accuracy of key calculations, such as asset cost, salvage value, and useful life.

Evaluate adequacy of controls:

Assess if the review steps are comprehensive and address key areas (e.g., reconciling
depreciation expense to general ledger, verifying accuracy of asset information, testing
calculations).

Confirm the review is performed timely and documented appropriately.

Effectiveness Testing Steps:

1. Select a sample of depreciable assets and trace them from the asset register to the depreciation
report.

2. Verify that the depreciation expense for each asset is calculated correctly based on the policy.

3. Compare the total depreciation expense in the report to the general ledger and tax return.

Supporting Documents:

 Depreciation report

 Fixed asset register

 Depreciation policy document

 Tax return
  General ledger

Items Tested:

 Asset details (description, cost, acquisition date, etc.)

 Depreciation calculations for selected assets

 Total depreciation expense

3.Control Assessment: Business Head Review of Dispute Aging Report

1. Risk Addressed:

 Inefficient dispute resolution: Delays in identifying and resolving disputes can lead to financial
losses, customer dissatisfaction, and reputational damage.

 Potential fraud: Unidentified disputes could be exploited for fraudulent activities.

 Non-compliance with regulations: Depending on the industry, regulations might mandate timely
dispute resolution timelines.

2. Data Request:

 Dispute aging report for the past 3 months, segmented by region and customer.

 Documentation of the review process by the Business Head (e.g., meeting minutes, email trails).

3. Test Steps:

a) Design Testing:

Supporting Document: Review process documentation (e.g., policy, procedure manual). Item: Review
steps outlined for Business Head analysis of the aging report.

 Frequency: Is the review conducted monthly as intended?

 Scope: Does the review cover all relevant information (e.g., aging periods, dispute
amounts, regional trends)?

 Escalation procedures: Are there clear procedures for escalating significant or unresolved
disputes?

 Actionable steps: Does the review process outline corrective actions or further investigations
based on identified issues?

b) Effectiveness Testing:

Supporting Document: Dispute aging report, review documentation, and action taken logs. Item: Review
outcomes and actions taken in response to the aging report.

 Timeliness: Are reviews conducted within the designated timeframe (monthly)?

  Completeness: Does the review address all key aspects of the aging report?

 Effectiveness: Are identified issues investigated and resolved promptly? Are appropriate actions
taken (e.g., contacting customers, adjusting entries)?

 Trend analysis: Is the review used to identify and address recurring issues or regional trends?

4.Control: Prior to month end, Finance team extracts CWIP report and obtains confirmation from
respective user department for items lying as CWIP.

a. Risk being addressed:

 Inaccurate financial reporting: Incorrectly classifying costs as CWIP when they should be
expensed can overstate assets and understate expenses, impacting financial statements and
investor confidence.

 Inefficient inventory management: Unjustified CWIP items could indicate

delays, inefficiencies, or waste in production processes.

 Fraudulent activity: Fictitious CWIP entries could be used to manipulate financial statements or
hide misappropriation of funds.

b. Data request:

 CWIP report extracted by Finance team for the current month-end closing.

 Confirmation documentation or emails sent to user departments seeking confirmation on the

accuracy and validity of CWIP items listed in the report.

 User department responses confirming or denying the validity of each CWIP item.

c. Test steps:

Design testing:

 Review internal control policies and procedures related to CWIP identification, classification, and
confirmation process.

 Interview key personnel in Finance and user departments to understand how the control
operates and is documented.

 Assess the control design's adequacy in mitigating the identified risks, considering industry best
practices and relevant regulations.

Effectiveness testing:

 Select a sample of CWIP items from the report, ensuring representation of different
types, values, and user departments.

 Trace each selected item to supporting documentation (contracts, purchase orders, work-in-
progress records) to verify its existence and legitimacy.
  Compare the user department responses with supporting documentation and reconcile any
discrepancies.

 Review the completeness and timeliness of user department responses.

 Investigate any unresolved discrepancies through further inquiries or escalation to management.

Supporting documents and items:

 CWIP report

 Internal control policies and procedures related to CWIP

 Confirmation documentation or emails sent to user departments

 User department responses

 Supporting documentation for selected CWIP items (contracts, purchase orders, work-in-
progress records)

a. Risk being addressed:

1. Delayed payments: Aged payable items indicate potential delays in vendor payments, which can
lead to late fees, damage to vendor relationships, and reputational harm.

2. Fraudulent activity: Unexplained aged items could be a sign of fraudulent activity, such as ghost
vendors or duplicate invoices.

3. Inefficient processes: Aged payable items can point to inefficiencies in the accounts payable
process, such as slow approvals, missing documentation, or communication breakdowns.

b. Data request:

1. AP ageing reports for the past year, including current and historical data.

2. Documentation of identified reasons for aged items, including investigation

notes, approvals, and resolutions.

3. Vendor master file, including contact information and payment terms.

4. Policies and procedures for accounts payable processing, including timelines for approvals and
payments.

c. Test steps:

Design Testing:

1. Review policies and procedures:

o Ensure policies clearly define timelines for invoice approvals, processing, and payments.

o Verify procedures for identifying and investigating aged items, including documentation
requirements.

o Confirm segregation of duties for invoice processing and approvals.

 2. Evaluate report format and content:

o Assess if the ageing report categorizes aged items appropriately by age range (e.g., 30-60
days, 60-90 days, etc.).

o Verify if the report includes key information like invoice number, vendor name, invoice
amount, and due date.

Effectiveness Testing:

1. Select a sample of aged items:

o Choose a representative sample of aged items across different age categories and
vendors.

o Consider selecting items with higher invoice amounts or longer outstanding periods.

2. Trace selected items:

o Review supporting documentation (e.g., invoices, emails, approvals) to verify the

identified reasons for aging.

o Assess if reasons are legitimate and documented appropriately.

o Ensure corrective actions were taken (e.g., contacted vendors, adjusted payment
schedules).

3. Analyze trends:

o Identify recurring reasons for aging and assess their significance.

o Investigate if specific vendors or departments contribute disproportionately to aged

items.

4. Interview accounts payable personnel:

o Discuss their understanding of procedures for handling aged items.

o Evaluate their awareness of potential risks associated with aged payables.

o Assess their confidence in the effectiveness of controls.

Supporting Documents:

 AP ageing reports

 Documentation of identified reasons for aged items

 Vendor master file

 Accounts payable policies and procedures

 Interview notes with accounts payable personnel

Items Included while Testing:

 Specific invoice numbers and associated documentation

 Vendor contact information and payment terms

 Dates of approvals and payments

 Details of corrective actions taken (if applicable)