INTERNAL CONTROL AND RISK EVALUATION PAPER
Many businesses are concerned with information technology risks. Many organizations are concerned with different types of risk and attempt to control risk as they are assessed. In order to control risk, organizations must create control environments that set the tone of employee awareness and promote operational efficiency. One attempt to control risk is through risk assessment. The purpose of risk assessment is to identify organizational risks and evaluate additional or specific control procedures. The purpose of this paper is to analyze and assess the risks within the flow charts of accounts payable, accounts receivable, inventory, and payroll recommended by learning team E for Kudler Fine Foods, design internal controls to mitigate risks to the system, evaluate the application of internal controls to the system and discuss other controls outside the system that Kudler Foods may need. Risk Assessments
The accounts payable risk assessment is the validation of purchase orders. This flow chart should incorporate a matching invoice system where the purchase orders are required to match the receiving information. The matching system allows the purchase order to precede the arrival of the vendor’s invoice therefore allowing the accounts payable department to have both receiving information and purchasing information when the invoice arrives. Incorporating a matching procedure helps ensure that the invoice for goods or services has been received and the amount of the invoice is authorized via purchase order by authorized personnel. This system also ensures that goods being paid for have been authorized by proper personnel. All disbursements should be made by check and digitally signed and authorized by authorized treasury personnel in the accounts payable department. Management should be concerned about purchases that cannot be traced to inventory, and purchases paid at full price for shipments tagged as having missing or defective merchandise. Although Kudler has some perishable items within its inventory, management should also be concerned about high levels of written off waste or scrap product. Proper internal control measures will signal management of any irregularities.
The accounts receivable flow charts show the initiation of procedures, then prepare daily reports, then download sales information from Point of Sales System; authorized personnel should verify information before generating reports to be sent to clients. Customer reports and disputes should be handled by marketing personnel or a separate customer service department. Management should be concerned and notified about frequent complaints of shipment shortages or price changes. Verifying sales orders and shipments will prevent charges to fictitious accounts. It is important that management monitor sale and shipping activities regularly and note any discrepancies or changes to these accounts over a given period. Shipping of large orders should be verified by a supervisor or authorized personnel.
The inventory flow chart show the initiation of purchasing procedures, inventory additions should be dated with the date of the receiving report. Receiving reports should follow the matching principles of the purchase orders. A pre- installed, pre-numbered invoice system can aide in the document matching control. Inventory issues should be dated with the date of the shipment. Variances are investigated by authorized personnel, such as shipping documents not associated with a sale. Payment releases with authorized digital signature upon verification. The digital signature prevents check theft and forgery.
The payroll flow chart shows the initiation of the personnel procedures. Authorized personnel should verify any input of employment records before a file is generated. Records should be maintained in the human resources department....