Reliance on internal controls - part 2

In this lesson

1. 0:00 Identifying control deficiencies in audit
2. 0:36 How deficiencies relate to financial risk
3. 2:25 Oak Co purchasing scenario introduction
4. 3:36 Finding clues in control documentation
5. 4:32 Five key deficiencies in Oak Co's process
6. 7:27 Presenting deficiencies in exam format
7. 8:30 Explaining the financial impact of each deficiency

About this lesson

You'll discover how to spot the subtle clues hidden in scenario questions that reveal where controls are weak or missing, and understand why these gaps matter to auditors and examiners alike. Control deficiencies are the gaps in a company's processes that could allow something to go wrong and cause financial loss. As an auditor, your job is to document how a client actually operates, then ask: what could still fail here? This lesson walks you through a practical example using Oak Co, a furniture manufacturer, showing you exactly how to extract facts from a scenario and explain what could go wrong as a result. You'll learn to spot red flags like unclear responsibilities, verbal communication instead of written records, missing approval criteria, and manual data entry — all common weaknesses that examiners test. The key to answering these questions well is to present your findings in the table format your exam provides. First, identify the specific fact from the scenario that suggests a problem. Then, explain the potential consequence: what financial or operational impact could occur if this weakness isn't addressed? By working through real exam-style scenarios and thinking like a detective searching for clues, you'll build confidence in recognising deficiencies and articulating why they matter. This systematic approach will help you score well on your case study questions and develop the analytical thinking auditors actually use in practice.

Duration: 10m