5.3 and 5.7 thanks 192 MANAGING ORGANIZATIONS ANALYSIS AND INTERPRETATION PROBLE
ID: 2540662 • Letter: 5
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5.3 and 5.7 thanks
192 MANAGING ORGANIZATIONS ANALYSIS AND INTERPRETATION PROBLEMS AIP 5.1 Monitoring LO 4 Drivers for long hod (international and cross-country) moving companies le g., Alled Van l Euro Tronsportl are ofhen independent contraciors, whereas inder city movers are uwolly employees of the compony Why are lang-houl drivers ohen no employes of a compony® AIP 5.2 Voluntary Disclosure of Performance Measures LO 4 The US Securities Acts of 1933 and 1934 required publicly troded companies to audited financial statements with the government and regulated the contenl and nature of these file annud flin ngs. Yet, prior to these legislative requirements, many firms voluntarily issued audited prohe and loss slatements and bolance sheets Discuss the odvanitages and disadvantages of such voluntary disclosures. AIP 5.3 Separation of Duties LO 1 in a bank, the employse interocting with someone seeking o loan does not have the authority to grant the loan. Why is the employee not given the responsibility to grant the loan? AIP 5.4 Choosing Performance Measures LO 1, 5,9 Jen and Barry opened an ice cream shop in Manchester. It was a big success, so they decide to open ice cream shops in many cities including Bristol. They hire Dante to manoge the shop in Bristol. Jen and Barry are considering two different sets of performance measures for Dante. The first set would grode Dante bosed on the cleanliness of the restaurant and customer service. The second set would use accounting numbers, including the profit of the shop in Bristol What ore the odvantages and disadvantages of each set of performance measures?Explanation / Answer
Answer to 5.3
The control procedure of an organisation depends on various factors and for the smooth and efficient running of the organisation stringent internal control plays a vital role.Effective internal control is essential to prevent the organisation from the instances of fraud and fraud risk.
In current scenario, the employee is inter-acting with the person requesting for loan. Thus, there are possibility that the employee may be biased towards the person asking for loan and there are chances that employee independence may get effected. Thus, in case the employee is allowed to approve the loan then he may grant the loan without following all the procedures and without collecting and verifying all the relevant documents. The employee may perform the job of granting loan under influence and biasedness. Thus, the employee is not provided with the authority of giving loan
For the purpose of internal control, appropriate seggregation of duties and maker-checker mechanism plays an effective role. By not giving the employee authorisation for approving the loan, the organisation implemented seggregation of duties and maker-checker mechanism.
Answer to 5.7
In the current case, Mary has hired a person for handling cash as well as closing shop for 5 days a week but Mary has allowed same person to collect and operate the cash. Further, there is control related to cash counting and ensuring whether all cash received are correcting recorded in books of accounts. Since, the hired person is handling the cash, there are possibility of cash embezzlement. It may happen that the person may not record certain amount received in cash and may theft the cash. Thus, Mary should established a maker-checker mechanism and should ensure proper seggregation of duties. Mary should perform cash physical verification at periodic intervals and if possible should try to seggregate the cash related activities between herself and the hired employee. For maintaining the same in smooth manner Mary may allocate some other activities to the hired individual.
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