Reference no: EM132594601

Question - Milly Inc. has hired an audit firm to examine the controls in place at Heffer Ltd., a company that Milly Inc. is considering acquiring. Milly Inc. requires assurance that the controls at Heffer Ltd. are working effectively before proceeding with the acquisition. The following information has been provided with respect to Heffer Ltd.'s controls: Control 1: Purchase requests (PRs) from operating departments of Heffer Ltd. are authorized by a designated individual in the requesting department. Control 2: The purchasing clerk verifies that there is an appropriate signature on the PR and then issues a prenumbered purchase order (PO). The purchasing clerk retains copies of the PR and the PO and files them by PO number. Control 3: The purchasing manager reviews all POs and PRs to ensure that the PR is authorized by a designated individual. Approved POs are then forwarded to the buyer. Control 4: The buyer must select a vendor from a preapproved list for all POs over $10,000. For POs under $10,000, the buyer can select any vendor. Control 5: Capital assets purchased are tagged with an identification number and recorded in an Excel spreadsheet where depreciation is automatically calculated.

Required - For each of the controls described above, briefly state the purpose of the control and describe a test to determine whether the control is operating effectively.