Acca aa s21 Notes

3. Control activities
The auditor must 
identify
the control activities that address risks of material misstatement at the 
assertion
level.
Examples of control activities include the following:
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Segregation of duties.
This means separating the responsibilities for authorising transactions, 
recording transactions and having custody of assets. So, for example, a person cannot make a 
sale, omit to record it and pocket the cash. Where, especially in smaller entities, there is less 
scope for segregation there will be a greater need for independent checks and management 
supervision.
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Authorisation and approval.
The authorisation or approval and control of documents is very 
important. Transactions should be authorised (i.e. confirmed to be valid) by an appropriate level 
of management. For example the purchase of non-current assets, agreeing credit terms, the 
writing off of a bad debt, and employees’ overtime. Approval may be automated (e.g. invoices 
less than a pre-established monetary amount and matched to a purchase order are 
automatically approved for payment).
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Verifications. 
Verifications may compare two or more items or an item with a policy, and 
typically involve a follow-up action if items do not match/are not consistent with policy.
Comparing, for example, goods received notes with the original purchase orders to make sure 
that what has been received was, in fact, what was ordered. Verifications generally address the 
completeness, accuracy, or validity of processing transactions.
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Accounting reconciliations.
Reconciliation is the process of ensuring that two sets of records 
from different sources agree. For example comparing the cash balance with a bank statement or 
comparing a payables balance with the supplier statement. If the balances do not agree, they 
must be reconciled (ie the differences identified and properly accounted for). Reconciliations 
generally address the completeness and/or accuracy of processing transactions, including cut-
off. 
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