Seminar 8 - Internal Controls I

School: Nanyang Technological University - Course: ACC 2104 - Subject: Accounting

Part A You are assigned to audit the financial statements of Apps1 Pte Ltd (A1) for the year ended 31 December 2021. The approved audit strategy requires the use of data analytics to analyse the payment, receipt and cash transactions to identify transactions for further investigation. A1 maintains one bank account with CCC Bank for all deposits and withdrawals except payroll payments. A separate bank account with DD Bank is maintained specifically for payroll payments only. On payroll day, a sum of money equivalent to the total net pay will be transferred from the CCC bank account to the DD bank account via electronic transfer (FAST transfer). Payment is then transferred from the DD bank account to the employees' bank accounts. The payroll payment includes payment to all Management staff, such as the Chief Executive Officer, who is also a Director of A1, and the Finance Manager. Payments to accounts payable are via cheques through the CCC bank account. Receipts from receivables are deposited into the CCC bank account. A1 does not sell on cash terms. The Finance Manager approves all payment vouchers, and the Chief Executive Officer is the sole bank signatory to both bank accounts. The Finance Manager, who is the Head of Accounting and Finance department, has provided you with the following spreadsheets: • Payment Voucher transactions from 1 December to 31 December 2021 (Appendix A); • Cash Book transactions from 1 December to 31 December 2021 (Appendix B); and • CCC Bank Statement transactions from 1 December to 31 December 2021 (Appendix C). Assume today is 15 January 2022. Required: (a) From the THREE (3) appendices (i.e., Appendix A, B and C) provided, identify and explain SIX (6) individual transactions that require further investigation. For each transaction, your answer should include ONE reason for further investigation. 1.Payment of 100k to CEO -Under CA, the director is not allowed to borrow money from the company → potential NOCLAR breach (direct effect because companies act→ report in-house to AC→consider if want to leave the job) -Payee is the CEO(who is the sole bank signatory) --> need to investigate why the payment was paid to the CEO 2.Cash deposit of 100k → question mentions the company does not involve in cash sales -17.12.2021 cash deposit of 100k → very round number and also exact amt for payment to CEO (could be CEO top it back up) -Need to investigate why there was a cash deposit when it is not for AR settlement or cash sales 3.Payment of $5,000 (Miscellaneous)

-Transaction was not reflected in the cash book w=but was reflected in the bank statement 4.Payment of $140,000 to CEO →another payment out to CEO; round figure as well -CEO is also the sole signatory(can sign off on his own payments), this amt is also not repaid at the EOY -Need to investigate why the payment was paid to the CEO 5.Cash deposit of 38,800 -Deposit was not reflected in Dec'21 bank statement -Need to check Jan'2022 bank statements if it is due to bank cheque clearig time 6.Cash deposit of 50,000 -End of year deposits may not be reflected in Dec'21 statements so need to check Jan'22 too because it may be due to cheque clearing time -Deposit is not for AR settlement or cash sales as company does not have cash sales 7.Payment Voucher transaction of 4,387 -PV date was 27th December but the cash payment was on 21st → ie payment was done before approval