Oceanview Marine Company 10-8

Control Environment — Summary NG 2/23/2019

December 31, 2018

Level of Control

Effective Ineffective Comments

1. General:  ☐ W/P 10-1

Management’s philosophy and W/P 10-1

 ☐
operating style

Organizational structure  ☐ W/P 10-2

Methods to communicate the W/P 10-2

assignment of authority and  ☐
responsibility

Management control methods  ☐ W/P 10-3

Audit committee  ☐ W/P 10-3

Internal audit  ☐ W/P 10-3

Personnel policies and procedures  ☐ W/P 10-3

External influences  ☐ W/P 10-4

2. Computer Hardware and Systems

 ☐ W/P 10-5
Software

3. Computer Software Applications  ☐ W/P 10-6

4. IT Department ☐  W/P 10-7

Conclusions:

Based on the overall level of control of each level, I can conclude that the company is very effective
with regards to control. The fact that this company is very small, also allows for effective controls.
The area with any issue would be the IT Department as the segregation of functions between the IT
Department and users is lacking.

Current workpapers — assess control risk  Page 44

 Oceanview Marine Company 13-3
Internal Control Questionnaire: NG 2/23/2019
Acquisitions
December 31, 2018

Control Objectives and Questions * YES NO REMARKS

Approved by Cynthia
(1) Are purchases transactions supported by approved
E  ☐
purchase orders?
Approved by Don
(2) Are documents cancelled to prevent re-use? E  ☐
Preformed by Mark
(3) Are receiving reports prenumbered and properly
Co  ☐
accounted for?
Accounted By Cynthia
(4) Are receiving reports controlled in a manner that helps
Co  ☐
assure that all goods received are recorded?
Performed by Ray
(5) Is there internal verification of the calculations, prices,
A  ☐
and quantities on vendors’ invoices?
Reviewed by Cynthia
(6) Does someone independent of the recording of
purchases function verify that the proper accounts have Cl  ☐
been debited and credited for purchases transactions?

(7) Is there an independent comparison of dates on

receiving reports to dates recorded in the voucher T ☐ 
register?

(8) Is there a policy requiring recording of purchases on a

daily basis as close to time of receipt of goods as T ☐ 
possible?
Automatically preformed
(9) Is the voucher register independently footed and posted
P  ☐ by computer
to the general ledger?
Preformed by Cynthia
(10) Is an independent reconciliation of the accounts
payable subsidiary records and the general ledger P  ☐
performed regularly?

* Audit Objective for Tests of Controls and Substantive Tests of Transactions:

Accuracy Existence or occurrence
Classification Posting & summarization
Completeness Timing

Current workpapers — assess control risk  Page 60

 Oceanview Marine Company 13-4
Preliminary Assessment of Control Risk: NG 2/23/2019
Acquisitions
December 31, 2018

occurrenceExistence/

SummarizationPosting and
Completeness

Classification
Objectives:

Accuracy

Timing
1. Management Philosophy and Operating Style
 ☐ ☐ ☐ ☐ ☐
2. Organization Structure
 ☐ ☐ ☐ ☐ ☐
3. Assignment of authority and responsibility
☐  ☐ ☐ ☐ ☐
4. Management control methods
☐  ☐ ☐ ☐ ☐
5. Audit committee
☐ ☐  ☐ ☐ ☐
6. Internal Audit
☐ ☐ ☐  ☐ ☐
7. Personnel policies and procedures
☐ ☐ ☐ ☐ ☐ 
8. External Influence
☐ ☐ ☐ ☐ ☐ 

9.
☐ ☐ ☐ ☐ ☐ ☐

Control Deficiencies:
1. It Department
☐ ☐ ☐ ☐  ☐
2. Computer Software
☐ ☐ ☐ ☐  ☐
3.
☐ ☐ ☐ ☐ ☐ ☐
4.
☐ ☐ ☐ ☐ ☐ ☐

Preliminary assessment of control risk:

Enter H (high), M (medium), or L (low) in each column

Current workpapers — assess control risk  Page 61

 Oceanview Marine Company 14-1
Audit Program (planning format): NG 2/23/2019
Tests of Controls for Acquisitions
December 31, 2018

Objectives Existing Control(s) Tests of Control(s)

Examine purchase Orders for proof approval
Existence/occurrence— Purchases transactions are supported
recorded acquisition by approved purchase orders (W/P 13-
transactions are for goods 3, #1).
and services actually Documents are cancelled to prevent re-
received use (W/P 13-3, #2). Examine Voucher packages for indication of
cancellation

Examine receiving reports of prenumbering

Completeness—all Receiving reports are prenumbered and
accounts for a sequence
acquisition transactions accounted for regularly (W/P 13-3, #3).
are recorded Receiving reports are controlled in a
manner that helps assure that all goods
Observe Process of preparation and routing of
received are recorded (W/P 13-3, #4). receiving reports

Examine vendor’s invoices for indication of

Accuracy—acquisition Internal verification of invoice
internal verification
transactions are recorded information (W/P 13-3, #5).
at the correct amounts

Ask Cynthia where she verifies that the correct

Classification— Independent verification that the proper
accounts have been debited and credited for
acquisition transactions accounts have been debited and
purchase transactions
are debited and credited to credited for purchases transactions
the proper accounts (W/P 13-3, #6).

N/A
Timing—acquisition None.
transactions are recorded
on the correct dates

Posting and Voucher register is independently

summarization— footed and posted to the general ledger
acquisitions are correctly (W/P 13-3, #9).
totaled in the voucher Independent reconciliation of A/P
register and posted to the subsidiary records and the G/L
G/L and subsidiary performed regularly (W/P 13-3, #10).
records

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Current workpapers — tests of controls and substantive tests of transactions  Page 63
 Oceanview Marine Company 14-2
Audit Program (planning format): NG 2/23/2019
Substantive Tests of Acquisitions Transactions
December 31, 2018

Objectives Substantive Tests of Transactions

Existence/occurrence—
recorded acquisition
transactions are for goods
and services received

Completeness—all
acquisition transactions
are recorded

Accuracy—acquisition
transactions are recorded
at the correct amounts

Classification—
acquisition transactions
are debited and credited to
the proper accounts

Timing—Acquisition
transactions are recorded
on the correct dates

Posting and
summarization—
acquisitions are correctly
totaled in the voucher
register and posted to the
G/L and subsidiary records

Current workpapers — tests of controls and substantive tests of transactions  Page 64