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QNO ICQ Assumptions Old Course – (N18E)
168.010 TITANIUM CNO -- MRI.540
In the use of standardized Internal Control Questionnaire (ICQ), certain basic assumptions about elements

of a good internal control system are taken into account. List down few such assumptions
Answer ➢ Basic Assumption about Elements of Good Control in Standardized Internal Control
Questionnaire:

In the use of standardized internal control questionnaire, certain basic assumptions about
elements of good control are taken into account. These are–
Certain procedures in general used by most business concerns are essential in achieving
reliable internal control. This is a time-tested assumption. Deposit into bank of the entire
receipts of a day or daily balancing of the cash book and ledgers or periodic reconciliation
with the control accounts are examples of widely used practices which are considered
good internal control practices. Besides, basic operations giving rise to these practices
exist in all businesses irrespective of their nature.

Organizations are such that permit an extensive division of duties and responsibilities. The
larger the organisation, the greater is the scope of such division.

Employees concerned with accounting function are not assigned any custodial function.

No single person is thrust with the responsibility of completing a transaction all by
himself.

There should always be evidence to identify the person who has done the work whether
involving authorization, implementation or checking.

The work performed by each one is expected to come under review of another in the
usual course of routine.

There is proper documentation and recording of the transactions.
Authors Note:

Question is on Assumptions of Good Internal Control System. Ultimately they explain requirements of
good internal controls system. Answer by ICAI explains that good internal control system, need
following assumptions / requirements.
(I know question is not properly drafted there is ambiguity), so assumptions here means basic
requirements of good internal control system

Internal Control Weakness Identified in Purchase & Account Old Course – (M21M)
QNO
168.020 Payable, What audit procedure should be performed ?
TITANIUM CNO -- Unique
During the process of extracting the exception reports, the auditors noted numerous purchase entries
without valid purchase orders. In terms of percentage, about 40% of purchases were made without valid
purchase orders whereas few purchase orders were validated after the actual purchase. Also, there was
no reconciliation between the goods received and the goods ordered. You are required to briefly explain
the audit procedures to address the validity of account balance level.
Answer In the given scenario, the auditors noted numerous purchase entries without valid purchase orders
during the process of extracting the exception reports. Further, in terms of percentage, about 40% of
purchases were made without valid purchase orders and also few purchase orders were validated after
the actual purchase. Also there was no reconciliation between the goods received and the goods
ordered.

Audit Procedures: The following procedures may address the validity of the account balance:
▪ Make a selection of the purchases, review correspondence with the vendors, purchase requisitions
(internal document) and reconciliations of their accounts.

▪ Review Vendor listing along with the ageing details. Follow up the material amounts paid before
the normal credit period and analyse the reasons for exceptions.
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