Chapter 8 Systems and Controls

Question 1

Control recommendation relating to Asset Verification?

Answer 1

1. All assets over a certain value are determined by the head of internal audit and review by the audit committee.
2. These will then need to be physically verified by the internal audit team.
3. There will need to the correctly trained and funded staff within the internal audit team.

Question 2

Control recommendation relating to Employee Training?

Answer 2

1. Implement a comprehensive training program for new members.
2. This will be used to improve accuracy and competence throughout the company.
3. Once the training has been completed a test will need to take place to ensure each employees competence throughout.

Question 3

Control recommendation for lack of segregation of duties?

Answer 3

1. Ensure that each department only have access to each of their related controls.
2. Ensure that each department does not have the ability to approve their own work or verify transactions without a senior team member.
3. Payments will need to be verified before completion.

Question 4

Control recommendation of wage increase approved without segregation?

Answer 4

1. Implement a system where wages increase are approved by a separate team and this can be done automatically so there is an audit trail of the increase. This will help avoid any possible discrepancies and conflict.
2. Establish clear documentation protocols for any changes in wage rates.
3. All communications, approvals and supporting documentation should be systematically recorded.

Question 5

Control recommendation of invoices approved without segregation?

Answer 5

1. Each invoice should need to be review by a senior member of management, especially when it’s involving invoices and payments.
2. Invoices will need to be confirmed with management against the related goods received note to ensure the correct goods have been purchased.
3. The finance director should authorize payment over a certain value indicated by a reviewed and authorized purchase policy.

Question 6

Control recommendation of approval of purchases without confirming credit terms?

Answer 6

1. The company should update their system to ensure that the FC processes payments for the suppliers within the credit terms given.

Question 7

Control recommendation for static credit terms?

Answer 7

1. The credit controller should frequently establish a regular review process for credit limits.
2. This will help reflect any changes in customer financial conditions and mitigate credit risk effectively.

Question 8

Control recommendation for no segregation of use of access codes?

Answer 8

1. Implement a unique access code for each warehouse site.
2. Additionally you will need to restrict unauthorized access.
3. This code should be regularly adjusted or change so that employees who leave no longer have access.

Question 9

Control recommendation of incomplete inventory counts?

Answer 9

1. Develop a plan to ensure month inventory counts.
2. this will need to be completed and maintained during reorganization and disruption.

Question 10

Control recommendation for no reconciliation policy?

Answer 10

1. Develop a policy for handling reconciling items.
2. This will include processes for potential discrepancies and shall require further review by the finance director and signed off to ensure all has been completed effectively.

Question 11

Control recommendations relating to a WIP valuation?

Answer 11

1. A specialist should continue to be used to value the WIP.
2. If the company no longer wishes to the warehouse manager could perform valuation and have the speciallist check.

Question 12

Control recommendations relating to third party goods?

Answer 12

1. Any stock relating to a third party should be separate from the original inventory.
2. This should be clearly marked to a avoid any possible miscounting.

Question 13

Control recommendations relating to discrepancies in the inventory sheets?

Answer 13

1. All differences should be investigated.
2. Once investigation is completed only then the inventory records can be amended.

Question 14

Control objectives of a sales system?

Answer 14

1. To ensure that orders are only accepted if goods are available to be processed for customers.
2. To ensure that all orders are recorded completely and accurately.
3. To ensure that goods are not supplied to customers who are poor credit risks.
4. To ensure that only genuine sales supported a valid order are recognised in revenue.

Question 15

Corporate governance systems and controls?

Answer 15

1. An individual who is fully independent should appointed as chair.
2. All directors subject to annual re-election by the shareholders.
3. The remuneration should be revised so they are paid annual fees for their services.