Q1 Within the application control area there is a key component in processing controls. This takes into account validation tests, sequence tests, arithmetic accuracy, data reasonableness, and completeness tests.
A validation test ensures that the master files match the database and the processing within the programs. Sequence tests determine that the data being processed is done so in the proper order. Arithmetic accuracy checks that the processing of data entered into the system is correct. Data reasonableness determines if the data is within specified ranges or violates established parameters. This data is more associated with data that would kick-out on an exception report. Lastly, completeness test, this simply determines that all field of a record are complete, we see this in sales invoicing and payroll records as some examples. Any thoughts?
Q2 The auditor tests controls for the particular time, or throughout the period, for which the auditor intends to rely on those controls. Audit evidence pertaining only to a point in time may be sufficient for the auditor's purpose, for instance, when testing controls over the entity's physical inventory counting at the period end.
If, on the other hand, the auditor intends to rely on a control over a period, tests of the control at relevant times during that period are appropriate. Such tests may include tests of the entity's monitoring of controls. When evaluating the operating effectiveness of relevant controls, the auditor must evaluate whether misstatements that have been detected by substantive procedures indicate that controls are not operating effectively.
The absence of misstatements detected by substantive procedures, however, does not mean that controls related to the assertion being tested are effective. A material misstatement detected by the auditor's procedures is a strong indicator of the existence of a significant deficiency in internal control. Any thoughts?
Q3 We have been discussing several performance measure and advantages and disadvantages of each. As a CFO what other performance measures (quantitative and non-quantitative) would you recommend as important performance measures for your organization? Include advantages and disadvantages in your discussion.
Q4 Chapter 11 of the text mentions a number of criteria to evaluate investment criteria. Let's discuss the different criteria used and discuss the benefits and negatives of each criteria. Which one would you recommend overall and why?