Case 1
a. Conducting bank reconciliation monthly is an important part of the control activity of the
company to reconcile bank records to accounting records. It is also considered a tool for
preventing and detecting fraud. Therefore, if the firm is not conducting bank reconciliation on a
regular and timely basis, there is an increase to control risk which may result in employee fraud.
b. Cash in Bank is the key account balance to be affected due to that weakness.
c. The inclusion of fictitious transactions can affect the account balance of an entity, particularly its
existence. On the other hand, completeness regarding transactions to/from the bank is possibly
omitted
Case 2
a. The direct credit of accounts payable is evidence to increase the control risk. This just means
that there is a lack of internal control pertaining to accounts payable accounts as well as
whether the goods are received.
b. Therefore, the two key accounts that are possibly affected are inventory and accounts payable.
c. The key assertion that is affected in this case is existence and rights and obligations. There is a
possibility of overstatement of inventory when the goods are recorded even though there is no
verification of actual delivery and overstatement of accounts payable if Titan Corp. recorded the
account even though there is no legal obligation yet to carry.
Case 3
a. An important internal control measure for accounts receivable is credit limit checking. But due
to a gap in that control because of a vacant position to fill that vital role, there is an increased
control risk in the organization.
b. Primarily, the affected account is accounts receivable.
c. There is an impairment in the accuracy, valuation, and allocation of accounts receivable. The
continuous operation may cause various sales that entail credit transactions. Without in-charge
personnel to credit-limit, some debtors may be granted even if their credit exceeds its limit
causing accounts receivable to be overstated, as well as the allowance for uncollectible.