problem 1:

a) Define the term control environment? Why is it significant to an entity?

b) Why should an internal control system be monitored over time?

problem 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 associated areas 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 purchasing, receiving and storing inventory. The payroll agent handles all payroll matters comprising personnel records, keeping time cards, preparations of payroll and distribution of payroll checks.

Required:

Consider each of such new positions and describe the implications of their duties on the internal control system. Moreover, describe what problems could occur if these positions are made.