...Case 21: ZOU's Fencing Controls Handout 1 Page 1 ZOU Fencing Inc. (Case 13-9 handout) Account Scoping and Risk Assessment Account Balance and Disclosure: Revenue Class of Transaction: Recording Sales Risk #1 All orders shipped are not recorded as revenue. Completeness. No. No. Control #1: Sales are automatically recorded and invoices are automatically generated upon the release of the order in the Warehouse K-Series System. Orders are not released until the goods have been confirmed for shipping in the system (which occurs when the goods are scanned as they are loaded in the shipping area). No. Identification of risk of misstatement ("what could go wrong") Relevant assertion Significant risk? Risk of material misstatement because of fraud? Control activity that addresses risk of misstatement Does the control rely on information produced by the entity (or IPE)? If yes, list relevant information N/A Will we obtain audit evidence of the accuracy and completeness of information produced by the entity by testing controls or by performing procedures directly on the information? Is the control automated? Relevant application system (if we are testing information produced by the entity through tests of controls or the control is automated) Yes. Warehouse K System, which is subject to IT controls performed by management and tested within the IT controls workpaper. On the basis of the following factors, we concluded that the control is appropriately designed to address the stated...
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