A review of the sales ledger processes of ABC Limited.
An investigation into the purchase ledger system of XYZ and partners. Recommendations to improve the payroll system of QC Charity.
My advice to you would be to read the scenario over and over again, you will find things that start to stand out, simple little things, like for example the lack of control over Petty Cash which leaves the company open to Theft and Fraud, make notes, set out your report in rough form, you can mess around with things until they start to make sense. Don’t make your paragraphs too long, and make sure every paragraph has a number. try to imagine describing it to a complete outsider. How you currently get from A to B?, is it achieving what it should do?, is it efficient?, is it safe?, is it compliant for data protection?, are there opportunities for fraud?, could it be done easier? I then constructed as SWOT analysis of the function I had chosen and its relation to the overall business, (strengths, weaknesses, opportunities and threats) which I used as the foundation for the project. I based mine around the system our company had for taking and recording card receipts for hotel and apartment accommodation and how they are recorded in the accounts. We had particular problems as the receipts required to be shared between two companies with subsequent VAT liabilities. There were loads of other issues such as the safe storage of client details, unreliable back up of computer data, inadequate systems for checking and recording the receipts, lack of systems and control and opportunities for fraud which came to light.
Types of internal controls
Specific control procedures include the following:
Supervision – There should be adequate supervision of work to ensure controls are being complied with. Otherwise, staff could commit fraud, errors could go undetected, time would then be wasted and queries could go unresolved. Examples:
Organisation – Businesses should have a formal, documented organisation structure with clear lines of responsibility. Otherwise, there may be a misunderstanding of who does what, work may not be completed as people may think that someone else is completing it. Also queries may be unresolved and staff will not know who to report to.
Arithmetic – The business should ensure that there are adequate controls to ensure the completeness and accuracy of its financial records, such as reconciliations. Otherwise there could be errors in the double entry (Dr/Cr errors), these may go undetected and time will be wasted trying to find and correct these at the year end. Examples:
Physical – There should be adequate physical controls to ensure the security and safe keeping of the businesses assets so that they do not go missing or are stolen. Examples:
Authorisation – Transactions should be authorised by management so that they are all necessary and business related.
Personnel – Employees should be appropriately qualified to be able to perform the required tasks. If staff are not properly trained the risk of error is higher. Examples:
Segregation of duties – There should be an appropriate division of responsibility to reduce the opportunity for fraud and manipulation
Fraud is when trickery is used to gain a dishonest advantage, which is often financial, over another person or business.
e.g. theft of assets or cash, deliberate misstatement of accounts. There are many words used to describe fraud. Scam, con, swindle, extortion, sham, double-cross, hoax, cheat, ploy, ruse, hoodwink, confidence trick. These are just a few words you might hear in relation to fraud.
Fraud Act 2006
The Fraud Act creates three new offences of “fraud”
? Fraud by False representation
? Fraud by failure to disclose information
? Fraud by Abuse of power
INFORMATION TECHNOLOGY SYSTEMS
There are three computers in the office, one for each member of the accounts team. These are all run on a stand-alone basis and are...
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