Question

In: Accounting

Identify at least three risks that auditors need to consider for companies that process Web-based sales...

Identify at least three risks that auditors need to consider for companies that process Web-based sales transactions, including credit card payments. For each risk identified, develop a mitigation risk strategy. Provide specific examples.

Expert Solution

ANSWER:-

Audit risk is tha risk that an auditor may give an inappropriate opinion on financial statement that is materially misstated.

if we consider companies that process sale transactions, including credit card payments, the auditoe shall look over the following risks.

1. Untrained or less trained staff - for web based business, tarined and well knowledged employees are needed to handle the complex computer and online work related to companies work. If trained employeed are not recruited the it may affect the auditor's opinion.

2. Imroper recording- recording of sale transactions in proper account and as per correct accounting standard is necessary, it may lower the audit risk and generate a correct opinion on financial information.

3. Wrong payment processor- as it is a web based sales company, so the security regarding the credit card payments and pin numbers is a most important aspect which is to be considered and make sured. becaue audit risk also invove the risk of fraud , hense for auditor detection of fraud is also important to give a relevant opinion.

Apart from these risk there can be more risks which are explained below

- Internal control risk

-Certain invoive issues

-Bank statement issues

To overcome these risks, the auditor should made proper audit strategy for better implementation of audit procedure

STRATEGY

1. Examine the internal control over receipt from sales.

2. Examine the authorisation level for making cash sales & receiving amount there from

3.Check the copy of invoice issued.

4. trace the relevant entry in cash book with reference to date on cash memos.

5.Check the card transactions summary

6.Ensure that revenue has been recognised as per requirement of proper AS

7.Authority for granting special discount should be examined.

ekkarill92 answered 8 months ago

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