To properly assess the internal controls that are in place at Bovar Company, you

Question

To properly assess the internal controls that are in place at Bovar Company, you have found that there are three major objectives that an entity should follow in designing an effective internal control system. They are as follows:

Reliability of financial reporting

Efficiency and effectiveness of operations

Compliance with laws and regulations

In 3–4 paragraphs, complete the following:

Discuss the meaning of each of the following major objectives:

Reliability of financial reporting

Efficiency and effectiveness of operations

Compliance with laws and regulations

Discuss how they might be satisfied at Bovar Company.

Prepare an unadjusted misstatement audit schedule with a comment on your judgment of the audit findings based on the following audit results for Bovar. Bovar has the following misstatements (any amount more than 5% of current assets, total assets, and income before taxes):

Understated allowance for uncollectible accounts: $95,000 estimated based on analytical procedures

Accounts receivable or sales cutoff misstatements: $60,000 estimated population misstatements based on the sample, including sampling error ($60,000 accounts receivables or sales were not included in the cutoff reporting period.)

Difference between physical inventory and book figures: $120,000 actual population misstatements. (The physical inventory is higher than the book figures by $120,000.)

Unrecorded liabilities: $285,000 estimated population misstatements based on the sample, including sampling error

Repairs or expense items that should have been capitalized: $90,000 estimated based on analytical procedures

Explanation / Answer

Reliability of financial statement:

The reliability of financial reporting means that you feel confident that all the transactions are from legitimate and authorized events. That no transactions were left out and no transactions are included twice or in the wrong period. Reliability financial reporting means that all transactions are recorded in the right amount, in the right period, in the right account and summarized correctly. And, finally, the summarized amounts are reported in the formal financial statements and related footnotes in.Bottom of FormTop of Form

Bottom of Form

Efficiency of operations: The simple, often used, definition of efficiency is ("doing the thing right"). We need this measure for marketing activities and business processes since it helps us see when we are minimizing resources or time needed to complete a process, i.e. we are keeping our costs low. In digital marketing, for example, efficiency involves increasing conversion rates and reducing costs of acquisition.

Effectiveness of operations: The simple definition of effectiveness is ("doing the right thing"). In digital marketing, effectiveness involves supporting broader marketing objectives and often indicates the contribution of the online channel.

Compliance with laws & regulations: Regulatory compliance describes the goal that organisations aspire to achieve in their efforts to ensure that they are aware of and take steps to comply with relevant laws and regulations

An audit is being done on a medium-sized company that is part of a conglomerate, the auditor must make   a materiality judgment based upon the conglomerate. Materiality may be larger for a company that is part of a conglomerate because even though the financial statements of the medium-sized company may be misstated, the large conglomerate statements might still be fairly stated. If, however, the auditor is giving a separate opinion on the medium-sized company, the materiality would be lower for the medium-sized company than for the audit of a conglomerate

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