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Financial Improvement and Audit Readiness MethodologyAssertion Work Product Example
Test Plans and Test Results
Detailed Activity 1.3.3 - Execute Tests of Controls (Reporting Entities)Detailed Activity 1.3.4 - Summarize Test Results (Reporting Entities)Detailed Activity 1.5.3 - Execute Tests of Controls (Service Providers)Detailed Activity 1.5.4 - Summarize Test Results (Service Providers)
Detailed Activity 1.5.5 - Identify, Classify, and Evaluate Deficiencies (Service Providers)
Table of ContentsTest Plans and Test Results - Template, Template Instructions, and Example
NOTE: The Tool/Template/Work Product in this workbook includes an internal control test plan template and instructions for using the template, as well as two example test plans. Financial Reporting Objectives and Control Activities would be identified if the template is properly completed.
Test Plan Template ð See spreadsheet titled "Test Plan - Template" and "Test Plan - Results - Template"Test Plan Template Instructions ð See spreadsheet titled "Test Plan - Instructions"Example Test Plan #1 ð See spreadsheets titled "SBR Test Plan - Example #1" and "SBR Test Plan - Results - EX #1"Example Test Plan #2 ð See spreadsheet titled "E&C Test Plan - Example #2" and "E&C Test Plan - Results - EX #2"
TEMPLATE
Template – Test Plan and Test Results – Activities 1.3.3 and 1.3.4 (Reporting Entity)/1.5.3, 1.5.4, and 1.5.5 (Service Provider) 1
Test Plan - Control Background, Test Procedures, Test Results, and Evaluation1 DoD Entity 4 Preparer2 5
3 6
7
8
9
10 Control Activity Description11 Test Objective(s)12 Control Type13 Control Frequency14 Testing Period15 Test Method16
17 Sampling Technique18 Sample Size and Basis19
20 Location of Testing21 Test Description22
23 Test Results24 Test Results
Evaluation of Test Results25
26 Tester's Signature & Date27
Financial Statement Line Item(s)
Preparer'sPhone #
Business Cycle(s)/Assessable Unit/Sub-Assessable Units
Documentation Location
Financial Statement Assertion(s)
Key Risk(s) of Material Misstatement (ROMM)
Financial Reporting Objective(s) (FROs)
Transaction Universe and Reconciliation
Acceptable Number of Deviations/Tolerable Misstatement
Test Procedures and Testing Attributes
Control Effectiveness Conclusion
Supervisor's Signature of Acceptance & Date
TEMPLATE
Template – Test Plan and Test Results – Activities 1.3.3 and 1.3.4 (Reporting Entity)/1.5.3, 1.5.4, and 1.5.5 (Service Provider) 2
Test Plan - Test Work Table
Sample # Sample ID # Description Sample Pass or Fail? Description of Exception/Rationale Work Paper ReferenceA B1 Pass
2 Pass
3 Pass
4 Pass
5 Pass
6 Pass
7 Pass
Total Sample Failures: 0 0
Tickmark Legend0 No Exception1 Exception
Testing Attributes
TEMPLATE INSTRUCTIONS
Template Instructions – 1.3.3, 1.3.4, 1.3.5 (Reporting Entity)/1.5.3, 1.5.4, 1.5.5 (Service Provider) Work Product-Test Plan, Test Results, and Summarized Test Results 3
Test Plan - Control Background, Test Procedures, Test Results, and Evaluation1 DoD Entity 4 Preparer
2 Enter the financial statement line item. 5 Enter the preparer's office phone number.
3 6
7
8
9
10
11 Test Objective(s)
12 Control Type
13 Control Frequency
14 Testing Period
15 Test Method
16
17
18
19
Enter the name of the component (e.g., Army, Navy, Air Force) or other defense organization (i.e., DCMA, DTRA, DLA).
Enter the name of the person completing the Test Plan form.
Financial Statement Line Item(s)
Preparer'sPhone #
Business Cycle(s)/Assessable Unit/Sub-Assessable Units
Enter the name of the high level end to end business cycle (i.e., Hire to Retire, Procure to Pay, Budget to Report) and specific sub-process associated with the control activity (i.e., disbursement of civilian payroll).
Documentation Location
If applicable to the test being performed, cite the location where documents (to support test) are stored. Also cite the office/organization responsible for maintaining the documentation.
Financial Statement Assertion(s)
Identify the financial statement assertion (Existence or Occurrence), Completeness, Valuation, Rights and Obligations, or Presentation and Disclosure) that control activity is designed to meet.
Key Risk(s) of Material Misstatement (ROMM)
Identify the key risk(s) of material misstatement which may occur in the financial statement line item, accounting application and associated business process. Note: The risks of material misstatements must be from the listing of key risk(s) of material misstatements in Section 5 or Appendix B (sections B.1.1, B.2.2, B.3.2, and B.3.3) of the FIAR Guidance.
Financial Reporting Objective(s) (FROs)
Identify the financial reporting objective(s) that is/are relevant to the aforementioned business process(es) and mitigates the identified key risk(s) of material misstatement. Note: The financial reporting objective(s) must be from the listing of financial reporting objectives/outcomes in Section 5 or Appendix B (sections B.1.1, B.2.2, B.3.2, and B.3.3) of the FIAR Guidance.
Control Activity Description
Identify the control activity that is currently in place to mitigate the key risk(s) of material misstatement and achieve the aforementioned financial reporting objective(s). Include a detailed description of the control activity, noting the following:1) Who performs the control activity? For manual control activity, there should be a preparer and reviewer/approver. 2) How is the control activity performed? 3) How (and when) frequently is the control activity performed?4) How is performance of the control activity documented (i.e., what forms are used)?5) How is performance of the control activity evidenced (i.e., signature and date on form)
Enter the purpose/objective of the control test (e.g., to verify that the control activity is operating as described and intended throughout the organization)Example: Verify that the Fund Balance with Treasury Reconciliation: is performed timely and by authorized personnel; is reviewed and approved by appropriate personnel; and identifies reconciling items which are researched and resolved via appropriate adjusting entries.
Identify whether the control activity is performed manually (e.g., manual authorization, review or reconciliation, etc.), is automated (i.e., system edit checks, system access restrictions and authorizations, automated review and approvals, etc.), or performed manually using system generated information (i.e., physically verifying existence of inventory using system generated inventory report).Note: Control activity should be documented on the "Controls Assessment" form.
Note the frequency with which the control is performed (e.g., annual, monthly, weekly, daily, recurring). Note: Frequency with which control is performed, number of individuals performing control and number of locations where control is performed must be considered as these factors determine sample sizes to be selected for testing.
Identify the timeframe for selecting transactions for control tests (e.g., all disbursements from October 1, XXX1 to March 31, XXX2).
Document the test method(s), to be used to execute control test The four types of tests are: Inquiry, Observation, Examination, and Reperformance. Note: Detailed explanation of each of the test types can be found in Section 3.E of the FIAR Guidance.
Transaction Universe and Reconciliation
Document the transaction universe (i.e., all civilian payroll payments made between October 1, XXX1 and December 31, XXX1) and reconcile the sum of the individual transaction balances (i.e. population) to the general ledger (or equivalent).Note: The transaction universe is any entire collection of transactions or other whole set of items for a given period of time from which we wish to draw conclusions, and from which the sample will be drawn.
Sampling Technique
Document the method used to select the sample. Note: The FIAR Guidance requires random sampling for tests of controls.
Sample Size and Basis
Document the sample size, and describe rationale for sample size selected. Note: Guidance for determining sample sizes can be found in Section 3.E of the FIAR Guidance.
Acceptable Number of Deviations
Document the acceptable number of deviations (i.e., how many exceptions are allowed before control fails the test?) Note: Guidance for determining acceptable number of deviations can be found in Section 3.E of the FIAR Guidance.
TEMPLATE INSTRUCTIONS
Template Instructions – 1.3.3, 1.3.4, 1.3.5 (Reporting Entity)/1.5.3, 1.5.4, 1.5.5 (Service Provider) Work Product-Test Plan, Test Results, and Summarized Test Results 4
20 Location of Testing Note the location where the test will be performed (e.g., Reporting Entity Headquarters, DFAS Cleveland, etc.)
21 Test Description
22
23 Test Results
Evaluation of Test Results24
25
26
Provide a summary of the test.Note: The test should be designed to ensure that the test objectives (Item 11 above) are satisfiedExample: Verify that the Fund Balance with Treasury Reconciliation has been completed and reviewed and all reconciling items have been researched and corrected by examining 3 months of FBWT Reconciliation documents for evidence of timely completion, preparer and supervisory review and approval, and timely and accurate resolution of reconciling items.
Test Procedures and Testing Attributes
Explain the test procedures in detail. List each step to be performed to ensure that the test objective is achieved. Identify the testing attribute(s), or element(s) or feature(s) of control activity that the control test is seeking to validate. Example: For each monthly FBWT Reconciliation document selected, examine the reconciliation and all associated documentation (JV forms, etc.) to ensure that: Attribute 1. Reconciliation was performed timely (month end- or within 5 business days thereafter)Attribute 2. Signature and date of preparer exists to evidence performance of reconciliation.Attribute 3. Reconciliation identified errors/exceptionsAttribute 4. Errors were researched and corrected through appropriate adjusting entriesAttribute 5. Documentation exists to support resolution of errors Attribute 6. Reconciliation is reviewed by appropriate personnel (supervisor) and evidence exists to support review
Describe the results of the test work performed (see test work table below). Document the number of sample items where at least one attribute was not met and also describe the number of errors associated with each attribute (e.g., noted that for 17 out of 45 sample items, there was at least one error. Specifically, we noted that for 10 of the 45 sample items, the reconciliations were not completed timely (Attribute 1) and for 12 of the sample items, there was evidence of supervisory review (Attribute 6).)
Control Effectiveness Conclusion
Based on the results of testing, state whether the control activity is (is not) operating effectively to mitigate the key risk of material misstatement and achieve the financial reporting objective. The control activity is deemed not to be operating effectively, if the number of exceptions (e.g., number of samples that had at least one error) exceed the maximum number of errors listed in the FIAR Guidance.
Tester's Signature & Date
Print the form, and have the tester sign and date this block attesting to the accuracy of the test plan. Note: Electronic signature is acceptable as well (e.g., "/s/ John Smith")
Supervisor's Signature of Acceptance & Date
Print the form, and have the tester's supervisor sign and date this block to indicate his review and acceptance of the test plan and documented test results. Note: Electronic signature is acceptable as well (e.g., "/s/ John Smith")
EXAMPLE
Example – Test Plan and Test Results – Activities 1.3.3 and 1.3.4 (Reporting Entity)/1.5.3, 1.5.4, and 1.5.5 (Service Provider) 5
Test Plan - Control Background, Test Procedures, Test Results, and Evaluation1 DoD Entity DFAS Columbus (CO) 4 Preparer John Smith2 5 XXX-XXX-XXXX
3 Procure to Pay/Vendor Pay/Disbursing 6
7 Valuation/Accuracy, Existence, Rights and Obligations
8
9
10 Control Activity Description
11 Test Objective(s)
12 Control Type Manual, dependent on system generated information13 Control Frequency Recurring14 Testing Period October 1, 2011 to March 31, 201215 Test Method Reperformance16
17 Sampling Technique
18 Sample Size and Basis
19
20 Location of Testing DFAS Columbus (CO)
Financial Statement Line Item(s)
Gross Outlays - Statement of Budgetary Resources
Preparer'sPhone #
Business Cycle(s)/Assessable Unit/Sub-Assessable units
Documentation Location
DFAS CO - Audit Readiness Office
Financial Statement Assertion(s)
Key Risk(s) of Material Misstatement (ROMM)
1. Recorded outlays are for invalid or unauthorized transactions and/or are not supported by disbursement evidence (SBR Wave 2, ROMM #10)3. Outlays and adjustments are reported at incorrect amounts (SBR Wave 2, ROMM #36)
Financial Reporting Objective(s) (FROs)
1. Outlays represent valid, authorized transactions and pertain to the entity (SBR Wave 2, FRO #55)2. Outlays are recorded at the correct amounts (SBR Wave 2, FRO #58)3. Outlays are recorded in the proper period (SBR Wave 2, FRO #60)4. Outlays are in an amount not exceeding the obligation, authorizing the outlay (SBR Wave 2, FRO #62)
Multiple times per day, the Disbursement Officer (Certification Section) reviews the Disbursement Voucher (prepared by the Accounting Technician) and supporting payment documents (Invoice, Receiving Report and Obligating document) for appropriateness and accuracy by agreeing the information in the invoice against the same fields in the Receiving Report and original Obligating document prior to certifying the voucher for payment. He documents his review and approval by signing and dating the voucher.
To verify that the Disbursement Officer reviewed the Disbursement Voucher and supporting payment documents to ensure that the documentation exists, is sufficient, and supports the validity and accuracy of the payment made. The test will also verify whether documentary evidence exists to support his review and approval (i.e., signature and date on payment voucher).
Transaction Universe and Reconciliation
We extracted a listing of all vendor payments made between October 1, 2011 and March 31, 2012 from the Disbursement system. We reconciled the sum of these transactions (disbursements) to the general ledger balance for account 1010.16 (GL sub-account for recording all vendor payments). There were a total of 8,356 vendor payments recorded during the testing period.
In accordance with sampling guidance prescribed by the April 2015 FIAR Guidance, we chose random sampling as our sampling technique, and selected a simple random sample using Microsoft Excel.
Considering the frequency of the control execution (multiple times per day) and the number of locations subjected to the sample (1- DFAS Columbus), we determined that a sample size of 45 is adequate to determine the operating effectiveness of the control. The sample size is consistent with the Department's sample size guidance as prescribed in the April 2015 FIAR Guidance.
Acceptable Number of Deviations/Tolerable Misstatement
For audit readiness purposes, for a recurring control activity, or one that occurs multiple times per day, the Department is willing to accept 5 deviations and still render the control effective.
EXAMPLE
Example – Test Plan and Test Results – Activities 1.3.3 and 1.3.4 (Reporting Entity)/1.5.3, 1.5.4, and 1.5.5 (Service Provider) 6
Test Plan - Control Background, Test Procedures, Test Results, and Evaluation21 Test Description
22
23 Test Results
Evaluation of Test Results24
25 Tester's Signature & Date
26
Examine a sample of recorded payments to ensure that evidence exists to support the Disbursing Officer's review and approval of the disbursement voucher and payment package, and that sufficient, accurate and relevant documentation exists to support the validity of the disbursement made.
Test Procedures and Testing Attributes
Test a sample of 45 recorded vendor payments. For each of the selected sample item:
Attribute A. Verify that an invoice exists to support the payment made.Attribute B. Verify that a receiving report exists to support the payment made.Attribute C. Verify that the original obligating document (purchase order or contract) exists to support the payment made.Attribute D. Verify that details of disbursement voucher agrees to information in payment voucher documents, and that recorded payment amount is supported by these documents. Attribute E. Verify that disbursement voucher and supporting payment documentation was properly reviewed and approved by the Disbursement Officer, and documented evidence exists to support his review and approval (i.e., signature and date on disbursement voucher).
Of the 45 sample payments tested we noted the following We noted that for 20 out of 45 sample items, there was at least one error. Specifically, we noted the following
1. For 17 of the 45 sampled items, there was no invoice (Attribute A) or receiving report (Attribute B) or original obligation document (Attribute C) to support the recorded payment, nor was their evidence of the Disbursing Officer's review and approval of the payment (. Since documents to support these 17 payments did not exist, we were unable to verify the accuracy and validity of the recorded payment amount (Attribute D). Also, there was no evidence to support the Disbursing Officer's review and approval of these payments (Attribute E).
2. For 20 of the 45 sampled items, an invoice (Attribute A), receiving report (Attribute B), and original obligating document (Attribute C) existed, and the documents supported the recorded payment amount (Attribute D); however, there was no evidence of the review and approval of the payment package (Attribute E)
Note: Please see the Test Work Table (on the spreadsheet titled "SBR Test Plan - Results - EX #1") for summarized test detail results.
Control Effectiveness Conclusion
Our test work noted that there were 20 sample items (of the total 45 selected) that failed one or more of the testing attributes above. Since 20 exceptions exceeds the Department's minimum acceptable deviation threshold of 5 allowable exceptions, we conclude that the control over the review of the Disbursement Voucher and Payment Package was not operating effectively during the period October 1, 2011 to March 31, 2012.
/s/ John SmithApril 28, XXX2
Supervisor's Signature of Acceptance & Date
/s/ Brian ReedApril 30, XXX2
EXAMPLE
Example – Test Plan and Test Results – Activities 1.3.3 and 1.3.4 (Reporting Entity)/1.5.3, 1.5.4, and 1.5.5 (Service Provider) 7
Test Plan - Test Work Table
Sample # Payment ID #
Testing Attributes
Description of DeviationA B C D E1 WZ311990 $8,922.00 0 0 0 0 1 Fail No evidence of review/approval of payment
2 JK4901136 $149,245.73 0 0 0 0 1 Fail No evidence of review/approval of payment
3 VC9000011 $44,998.13 0 0 0 0 1 Fail No evidence of review/approval of payment
4 NU8745672 $18,654.00 0 0 0 0 0 Pass
5 BO1187302 $132,987.45 1 1 1 1 1 Fail No supporting documentation/no evidence of review/approval
6 YH8765012 $769.98 0 0 0 0 1 Fail No evidence of review/approval of payment
7 CS7600011 $67,843.22 1 1 1 1 1 Fail No supporting documentation/no evidence of review/approval
8 WZ311990 $8,922.00 1 1 1 1 1 Fail No supporting documentation/no evidence of review/approval
9 JK4901136 $149,245.73 1 1 1 1 1 Fail No supporting documentation/no evidence of review/approval
10 VC9000011 $44,998.13 0 0 0 0 1 Fail No evidence of review/approval of payment
11 NU8745672 $18,654.00 0 0 0 0 1 Fail No evidence of review/approval of payment
12 BO1187302 $132,987.45 1 1 1 1 1 Fail No supporting documentation/no evidence of review/approval
13 YH8765012 $256.35 0 0 0 0 0 Pass
14 CS7600011 $4,563.22 0 0 0 0 1 Fail No evidence of review/approval of payment
15 WZ311990 $10,236.22 1 1 1 1 1 Fail No supporting documentation/no evidence of review/approval
16 JK4901136 $105,232.22 0 0 0 0 1 Fail No evidence of review/approval of payment
17 VC9000011 $45,123.55 0 0 0 0 1 Fail No evidence of review/approval of payment
18 NU8745672 $7,822.10 1 1 1 1 1 Fail No supporting documentation/no evidence of review/approval
19 BO1187302 $456.32 1 1 1 1 1 Fail No supporting documentation/no evidence of review/approval
20 YH8765012 $15,236.22 0 0 0 0 1 Fail No evidence of review/approval of payment
21 CS7600011 $47,298.56 1 1 1 1 1 Fail No supporting documentation/no evidence of review/approval
22 WZ311990 $45,632.11 0 0 0 0 0 Pass
23 JK4901136 $149,245.73 0 0 0 0 1 Fail No evidence of review/approval of payment
24 VC9000011 $44,998.13 0 0 0 0 1 Fail No evidence of review/approval of payment
25 NU8745672 $18,654.00 1 1 1 1 1 Fail No supporting documentation/no evidence of review/approval
26 BO1187302 $132,987.45 1 1 1 1 1 Fail No supporting documentation/no evidence of review/approval
27 YH8765012 $769.98 1 1 1 1 1 Fail No supporting documentation/no evidence of review/approval
28 CS7600011 $122,444.33 1 1 1 1 1 Fail No supporting documentation/no evidence of review/approval
29 WZ311990 $8,922.00 0 0 0 0 0 Pass
30 JK4901136 $149,245.73 0 0 0 0 1 Fail No evidence of review/approval of payment
31 VC9000011 $44,998.13 1 1 1 1 1 Fail No supporting documentation/no evidence of review/approval
32 NU8745672 $18,654.00 0 0 0 0 1 Fail No evidence of review/approval of payment
33 BO1187302 $132,987.45 0 0 0 0 1 Fail No evidence of review/approval of payment
34 YH8765012 $769.98 0 0 0 0 1 Fail No evidence of review/approval of payment
35 CS7600011 $67,843.22 0 0 0 0 0 Pass
36 WZ311990 $8,922.00 0 0 0 0 0 Pass
37 JK4901136 $149,245.73 1 1 1 1 1 Fail No supporting documentation/no evidence of review/approval
38 V69000011 $56,322.12 0 0 0 0 0 Pass
39 VC9000012 $2,563.88 0 0 0 0 1 Fail No evidence of review/approval of payment
40 VC9090013 $856.14 0 0 0 0 1 Fail No evidence of review/approval of payment
41 VC9000014 $26,356.89 1 1 1 1 1 Fail No supporting documentation/no evidence of review/approval
42 NU8745672 $1,200.00 0 0 0 0 1 Fail No evidence of review/approval of payment
43 BO1187302 $879.29 0 0 0 0 1 Fail No evidence of review/approval of payment
44 YH8765012 $45,888.36 1 1 1 1 1 Fail No supporting documentation/no evidence of review/approval
45 CS7600011 $365,255.00 0 0 0 0 0 Pass
Total Sample Failures: 17 17 17 17 37
Tick Mark Legend0 No Exception Noted1 Exception Noted
Recorded Payment Amount
Sample Pass or Fail
EXAMPLE
Example – 1.3.3, 1.3.4, 1.3.5 (Reporting Entity)/1.5.3, 1.5.4, 1.5.5 (Service Provider) Work Product-Test Plan, Test Results, and Summarized Test Results 8
Test Plan - Control Background, Test Procedures, Test Results, and Evaluation1 DoD Entity DoD Component - Base # 1 4 Preparer Dave Smith2 Property, Plant and Equipment - Balance Sheet 5 XXX-XXX-XXXX
3 6
7 Existence and Completeness
8
9
10 Control Activity Description
11 Test Objective(s)
12 Control Type Manual - Dependent on System Generated Information13 Control Frequency Annual (1 Time per Year) -- at 12 locations; 12 completed count sheets.14 Testing Period October 1, 2011 to September 30, 201215 Test Method Reperformance
Financial Statement Line Item(s)
Preparer'sPhone #
Business Cycle(s)/Assessable Unit/Sub-Assessable Units
Acquire to Retire/Property, Plant, and Equipment/General Equipment (GE)
Documentation Location
DoD Component - Base #1
Financial Statement Assertion(s)
Key Risk(s) of Material Misstatement (ROMM)
1. Recorded assets do not exist at a given date (E&C ROMM # 3)2. Assets of the reporting entity exist but are omitted from the APSR and/or summary schedules (E&C ROMM # 7)
Financial Reporting Objective(s) (FROs)
1. Recorded assets exist at a given date (E&C FRO # 3)2. All existing assets, as of the reporting date, including property in the custody of third parties, are included in the general ledger (E&C FRO #6)
Annually, the Accountable Property Officer (APO) provides a listing of General Equipment (GE) assets (that has been reconciled to the APSR and financial statements) to the Property Custodians at the installation. The APO provides comprehensive instructions for conducting the counts. The "DD Form ABC" has all the key financial management data fields (i.e., serial number, barcode, description of item, warehouse location) for each item to be inventoried.
The Property Custodians locates each item on "DD Form ABC". As part of the inventory, the Property Custodians verify the existence, location, and condition of all GE items, confirming these items by initialing and dating the appropriate space on DD Form ABC. In addition, Property Custodians then look for items that are at the installation facility, but are not listed in Form ABC -- these items are reviewed to determine whether they should included in the GE Asset listing or not. The Property Custodian documents any required adjustment (e.g., item on Form ABC but does not exist, item at installation warehouse but not Form ABC). The Property Custodian signs and dates "DD Form ABC," indicating that he/she conducted the inventory procedures accurately.
The Property Custodian's Supervisor verifies the accuracy of the inventory by randomly selecting items verified by the Property Custodian on "DD Form ABC." The Supervisor also reviews and either approves or rejects all proposed adjustments to property records. Upon verification of the GE and review of adjustments, the Supervisor signs and dates the appropriate section on "DD Form ABC."
To determine whether the annual inventory count sheets, indicating completion of inventory counts, are prepared timely and evidence of Supervisory review exists to demonstrate accuracy of the recorded items.
EXAMPLE
Example – 1.3.3, 1.3.4, 1.3.5 (Reporting Entity)/1.5.3, 1.5.4, 1.5.5 (Service Provider) Work Product-Test Plan, Test Results, and Summarized Test Results 9
Test Plan - Control Background, Test Procedures, Test Results, and Evaluation16
17 Sampling Technique
18 Sample Size and Basis
19
20 Location of Testing DoD Component - Base # 1, 6, and 921 Test Description
Transaction Universe and Reconciliation
Considering that the control activity is performed once per year at 12 different warehouse locations, our population of inventory counts to conduct the test of control is 12 locations. We randomly selected 3 warehouse locations at which to observe the count being performed and examine related documentation to support existence and completeness of assets. In addition, we randomly selected 45 of the assets that were counted at each warehouse (Note: there are thousand of assets stored at each warehouse location) to verify whether they exist and are recorded in the APSR completely and accurately.
In accordance with sampling guidance prescribed by the April 2015 FIAR Guidance, we chose random sampling as our sampling technique, and selected a simple random sample using Microsoft Excel.
Our total sample size is 3, since we chose three locations at which to perform testing. Within each of these locations, we chose a random sample of 45 asset items that were counted at each warehouse (Note: there are thousands of assets stored at each warehouse) (See #16 above)
Acceptable Number of Deviations/Tolerable Misstatement
Our total population of inventory counts to test was 12 since the control operates at 12 warehouse locations. Based on the Department's sampling guidance, we randomly chose three warehouse locations to conduct our control test. The acceptable number of deviations for a sample size of three is 0.
For the three locations selected for testing, verify the following:A. The Property Custodians signed and dated the DD Form ABC, confirming that they performed the asset counts to verify the existence and completeness of asset items.B. The Supervisor reviewed and approved the inventory count performed, as well as any proposed adjustments, and documented his review/approval by signing/dating DD Form ABC.C. Select 45 assets from the APSR at each of the three warehouse locations and verify that the assets exist. If they do not exist, confirm that the items were appropriately transferred or disposed, and that sufficient documentation exists to support their transfer/disposal. D. Select 45 asset items on the floor of each of the three warehouse locations selected for testing and verify that the assets are recorded in the APSR and GL. For assets not recorded in APSR and GL, ensure that the Property Custodians researched reason for omission and proposed appropriate adjusting entries.
EXAMPLE
Example – 1.3.3, 1.3.4, 1.3.5 (Reporting Entity)/1.5.3, 1.5.4, 1.5.5 (Service Provider) Work Product-Test Plan, Test Results, and Summarized Test Results 10
Test Plan - Control Background, Test Procedures, Test Results, and Evaluation22
23 Test Results
Evaluation of Test Results24
25 Tester's Signature & Date
26
Test Procedures and Testing Attributes
Physically observer GE asset counts being performed and examine documentation to ensure that: Attribute A. Physically inventory count was conducted at fiscal year end, or shortly thereafter (Within 10 business days of the end of the fiscal year). Property custodians signed and dated the DD Form ABC, confirming that they performed the asset counts to verify the existence and completeness of asset items.Attribute B. Evidence exists to support warehouse supervisor's review and approval of inventory count and supporting adjusting entries to property records (i.e., initials and date on Form 85A)Attribute C. All 45 assets selected from the APSR for testing exist at the warehouse . In cases where they do not exist, they have been appropriately transferred or disposed, and sufficient documentation exists to support their transfer/disposal (Existence). Attribute D. All 45 assets selected from the warehouse are appropriately entered in the APSR and GL. In cases where they are not entered, the appropriate adjustment is made.
We noted that:1. At two of the warehouse locations, there was no evidence (Signed and dated DD Form ABC) to support the Warehouse supervisor's review and approval of inventory count and supporting adjusting entries to property records (Attribute B)2. At all three warehouse locations sampled, the physical inventory counts were conducted timely and there was a signed and dated DD Form ABC to evidence the performance of the counts by the Property Custodians (Attribute A)3. At all three warehouse locations sampled, all 45 assets selected for testing physically existed at the warehouse, and if they did not exist, sufficient documentation was readily available to support their transfer/disposal (Attribute C).4. At all three warehouse locations sampled, all 45 assets selected from the warehouse for testing were appropriately entered in the APSR, and in cases where they were not entered, the appropriate adjustment was made (Attribute D)
Control Effectiveness Conclusion
Based on the test results, we conclude that the physical inventory count control was not operating effectively to ensure the existence and completeness of assets.
/s/ Dave SmithOctober 10, 2012
Supervisor's Signature of Acceptance & Date
/s/ Frank DoeOctober 10, 2012
EXAMPLE
Example – Test Plan and Test Results – Activities 1.3.3 and 1.3.4 (Reporting Entity)/1.5.3, 1.5.4, and 1.5.5 (Service Provider) 11
Test Plan - Test Work Table
Sample # Warehouse Location Assets Counted Description of DeviationA B C D1 RE Base 1 45 0 1 0 0 Fail No evidence of review by Supervisor
2 RE Base 2 45 0 0 0 0 Pass
3 RE Base 3 45 0 1 0 0 Fail No evidence of review by Supervisor
Total Sample Failures: 0 2 0 0
Tick Mark Legend0 No Exception Noted1 Exception Noted
Testing Attributes Sample Pass
or Fail