3. CCLtd\'s branch in regional Victoria employs around 200 staff Mary Cooper is
ID: 2570252 • Letter: 3
Question
3. CCLtd's branch in regional Victoria employs around 200 staff Mary Cooper is a highly competent employee of CCLtd. She has been responsible for accounting-related matters for two decades. Her devotion to the regional branch office has been exceptional, and over the years she has been given increased responsibility To pay the branch's expenses, Mary authorises the payments of invoices and signs the cheques. Cheques can also be signed by the financial controller of CCLtd. Generally, Mary receives the cancelled cheques and bank statements. She reconciles the branch account herself, files cancelled cheques and bank statements in her records. Every 6 months, Mary makes cash payment reports and sends them to the head office Occasionally, Mary approves the credit-limit for customers, records cash receipts in cash receipts journal and then records the entries in the computer system. Required Are there any deficiencies in the internal controls at CCLtd? If yes, how would you address those? Can information technologies enhance internal controls at CCLtd? Explain. (10 marks)Explanation / Answer
Answer: It appears that Many Cooper is acting as an One-Man-Army. The basic internal contro i.e segregation of duties is completely missing as Many cooper has a authority to sign cheques, collects cancelled cheques,bank statements, perform bank reconciliations, prepare cash payment report, recording of enteries, etc.
Segregation of duties serves a dual purpose i.e it ensures that there is a oversight and review by a second person to catch errors and it helps to prevent theft or fraud as two people need to collude to hide a particular transaction.
The following three functions should be seperated i.e having custody of assets, being able to authorise the assets and bookkeeping of the assets. This can be acheived by implementing Segregation of Duties control in an organistion. This control is difficult to implement in small organisation but should be implemented as much as possible. This may include involving an employee from other department amd making him responsible for one of the above functions.
Technology can help in establishin controls around SoD like giving only read only rights to one person and editing right to the other. Technology can play a part in bringing the incidents of breach of segregation of duties to the management Technology can help generate the log of non-compliances. However, the technology alone can not ensurethe segregation of duties in the business, Ultimately its the managements responsibility to adequately address the SODs issues.
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