Reference no: EM131791822

Problem

The Frist Corporation has the following internal controls related to inventory:

1.Only authorized inventory warehousing personnel are allowed in inventory storage areas.

2.All inventory products are stored in warehousing areas that are segregated from other storage areas used to house equipment and supplies.

3.All inventory held on consignment at Frist Corporation is stored in a separate area of the warehouse.

4.The inventory purchasing system only allows purchases from pre-approved vendors.

5.The perpetual inventory system tracks the average number of days each inventory product number has been in the warehouse.

6.Microchips are embedded in each product and when inventory items are removed from the warehouse to shipping, radio-frequencies signal a deduction of inventory to the perpetual inventory system.

7.On a weekly basis, inventory accounting personnel take samples of inventory products selected from the perpetual inventory system and verify that the inventory is on-hand in the warehouse and that the quantities in the listing are correct.

a. Identify the related transaction-related audit objective(s) affected by the control.
b.Describe risks the control is designed to mitigate.
c.Design a test of control to determine if the control is operating effectively.