You Have Been Hired by a Local Grocery Store to Evaluate

question 90

Essay

You have been hired by a local grocery store to evaluate the internal controls of the store.a.Identify the assets of value in the store.Describe the internal controls that are likely to be used by management to safeguard the assets of the store.b.Describe how you would document and test internal controls in this store.c.Using the audit risk model,illustrate how your reliance on internal controls affects the substantive testwork done for the audit of the grocery store.

---

Definitions:

Operating Leverage

A measure of how revenue growth translates into growth in operating income, determined by the proportion of fixed versus variable costs a company has.

Contribution Margin

The difference between sales revenue and variable costs, indicating how much contributes towards covering fixed costs and generating profit.

Income from Operations

The earnings generated from a company's core business operations before subtracting interest and taxes.

Profit-Volume Chart

A graphical representation that shows the relationship between a company's profits and its level of output or sales volume.