Reference no: EM132935525

Lilan's working papers for evaluating a client's internal controls include the following notes:

1. There were over 1,000 purchase transactions under $4,500 from four vendors; these are routine purchases.
2. All purchases over $4,500 are non-routine transactions and must be pre-approved by the purchasing manager, but one purchase for $15,000 was authorized by the plant manager without the purchasing manager's initials.
3. All cheque stubs for purchases should have purchase order numbers recorded, but 5% of the sample did not have the purchase order number recorded - traced the 5% to August payments.

Required
For each of the notes above answer the following questions:

Problem 1: Does it represent a possible control problem?

Problem 2: If yes, why does it represent a possible control problem?

Problem 3: If no, why is it not a potential control problem?