Page 96 - CA Final PARAM Digital Book.

Control Objectives (Accounting Control Old Course – (M09E, M12M, N13R, M15E, M16M, PM17,
QNO System) M21M, N23M)
165.100
TITANIUM CNO—MRI.320 New Course – (SM23)
As auditor of Z Ltd, you would like to limit your examination of account balance tests What are the control

objectives you would like the accounting control system to achieve to suit your purpose?
Answer ➢ Basic Accounting Control Objectives: The basic accounting control objectives which are sought
to be achieved by any accounting control system are –

Whether recorded transactions are real
Whether all transactions are recorded
Whether all transactions are recorded timely
Whether all transactions are properly classified
Whether all recorded transactions are properly valued
Whether all transactions are properly posted
Whether all transactions are properly summarized
Whether all transactions are properly disclosed
Author’s Note
The above answer has been arranged as per the flow so that it becomes easy to visualize.

This question and the above question are different to each other as above one asks about control
objectives and this one asks about accounting control objective.

Standard Operating Procedures (SOPs)of assessment and Old Course –(M19E, N21E, M23R)
QNO
evaluation of control environment
166.200
TITANIUM CNO—MRI.520
A newly qualified professional has received his first appointment as auditor of a large company and is very
much concerned about the effectiveness of internal control and wants to assess and evaluate the control

environment as part of his audit program. Towards achieving his objective, he seeks your help in knowing
the Standard Operating Procedures (SOPs) of assessment and evaluation of control.
Answer The quality & effectiveness of internal controls is directly dependent on the Organizational environment. The
tone at the top (the Board & Executive Management) & the credibility of the message on internal controls

from top plays an important role in establishing strong control environment. Following are some of the key
components to assess & evaluate the controls environment:

➢ Standard Operating Procedures (SOPs): A well-defined set of SOPs helps define role,
responsibilities, process & controls & thus helps clearly communicate the operating controls to all
touch points of a process. The controls are likely to be clearly understood & consistently applied
even during employee turnover

Enterprise Risk Management: An organization which has robust process to identify &
mitigate risks across the enterprise & its periodical review will assist in early identification
of gaps & taking effective control measures. In such organizations, surprises of failures in
controls are likely to be few.

Segregation of Job Responsibilities: A key element of control is that multiple activities in
a transaction/decision should not be concentrated with one individual. Segregation of
duties is an important element of control such that no two commercial activities should be
conducted by the same person.

Example-a buyer should not be involved in receiving of materials or passing of bills.
Similarly bank reconciliation should be prepared by a person other than the one who
maintains bank book.

Job Rotation in Sensitive Areas: Any job carried out by the same person over a long
period of time is likely to lead to complacency & possible misuse in sensitive areas. It is
therefore important that in key commercial functions, the job rotation is regularly followed
to avoid degeneration of controls. For example if the same buyer continues to conduct

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