Reference no: EM13377280

amy industries and wholesales small tool. it sell the tool to a large group of regular customer and make most sale by telephone to this group. additionally, it receives orders online by its sales team who sign up new customers within the sales area. in the past, amy has had trouble with customer who do not pay their account on time. despite instructing the sales team not to make sales to customer before their creditworthiness has been assessed, sales are still being made to new customer before their limit have been set and to assesses, sales are still being made to new customer before their limit have been set and to existing customer beyond their credit limit. also, the economic recession has start to impact its customers, and amy management is concerned about the possibility of increasing bad debts.

required:

a. what sort of prevent control could be use to deal with the problem face by amy? explain how the control would work?

b. assume prevent control is implemented, and during this year there have been no sale to customers that have taken any customer beyond its credit limit. what are two possible explanations for this that the auditor must consider?

c. if an auditor finds two sales transaction during the year that are in excess of a customer's credit limit at that time of the sale, what conclusion would the auditor draw from this evidence? what other evidence could the auditor consider before concluding thatprevent control has failed?