Question 2 (3 x 5 marks (15 Marks) Read the three case descriptions below: (A),

Question

Question 2 (3 x 5 marks (15 Marks) Read the three case descriptions below: (A), (B) and (C), which describo the existing internal control system at a manufacturing company (A) When the production manager, Alan Ackbar, orders materials, he sends a copy of the purchase order (PO) to the receiving department. When the materials are delivered, Jane Jabba, the receiving clerk, records the receipt of the materials on the purchase order and then sends the purchase order to the Finance department. The Assistant accountant uses the purchase order to record materials purchases and accounts payable. The materials are then sent to the warehouse and the quantities purchased are recorded in the inventory ledger. The assistant accountant processes payments. (B) Employees record their completed shifts using timesheets. The timesheets are collected on a weekly basis and sent to the IT department for data entry into the computer system. The data input in the computer system is used to prepare labour cost records by cost centre, the payroll journal and the payslips. The financial accountant compares the payroll joumal with the payslips and then returns them to the Manager of the IT department. The payslips are then distributed to the employees by the Manager of the IT department (C) The company has a distribution depot in Hobart and employs, Han Soilo, as its branch manager and Leila Vaddagh as his head sales assistant. The branch uses a bank account in Sydney to pay expenses. The account is kept in the name of "Leila-V- Special Account. To settle expenses, Leila uses online banking. In fact all banking correspondence from the banks regarding transactions of the sales depot get emailed to Leila Vaddagh. Leila reconciles the sales depot banking records with the bank statements. It is company policy to generate a cash report on a monthly basis for presentation and discussion at the finance meeting, which is held on the second Thursday at the end of the month at the head office in Perth. Leila emails the cash report two hours before the meeting.

Explanation / Answer

Hope this helps you mate !

Case Weakenss Type of Misstatement Control Improvements A this process does not include asking from the wharehouse if they have the materials which are being ordered Over buying of inventory and thus more closing inventory affecting profits Consult from the wharehouse regarding inventory position before ordering B Controller of the employees should record the shifts in the time sheets of the employee. Also HR department who supervise the workers has no role in the process Excess wages payment HR department should prepare the time sheet of their own also along with employees and check for discrepencies by the employees if any. Correct sheets should be sent by HR team to the IT dept who shall send it to accounts department who should return them to the HR manager who shall verify and sign them before giving it to workers C It appears that Leila herself is responsible for making payments and check them again which violates the basic principle of internal control that maker cannot be the checker. Company should have dual control over payment records where some other person checks the bank statements with branch's banking records. Also record should be sent atleast 2 days ago so they can be checked by someone at HO before discussion in the meeting No segregation of duties leading to chances of fraud and its cover up. Have a person appointed who verifies the bank records and send the documents atleast two days prior to the meeting to HO

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.