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CMA Intermediate · Corporate Accounting and Auditing · Audit Risk, Internal Control, Internal Check and Internal Audit

A company processes about 60,000 recurring sales invoices every month, and the price-matching check is currently done by clerks manually. Applying SA 315 on manual and automated elements of internal control, which statement is most appropriate?

Manual controls may be less suitable for high-volume recurring transactions, because predictable errors can be prevented or detected and corrected by automated control parameters. SA 315 also says consistency of manual controls cannot be assumed, since they are more easily bypassed and prone to simple mistakes.

  1. AManual controls are more suitable here because volume is high
  2. BManual controls may be less suitable here, since errors that can be anticipated can be prevented or detected by automated control parametersCorrect
  3. CAutomated controls cannot be used for recurring transactions
  4. DConsistency of manual controls can be assumed for high volumes

Explanation

SA 315 says manual elements may be less suitable for high volume or recurring transactions where predictable errors can be prevented or detected by automated parameters. Option A reverses this. The standard also says consistency of a manual control cannot be assumed, so D is wrong.

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