Deficiency Appendix Examples

Question 1

What are the consequences for the deficiency ‘No approved supplier list’?
(3)

Answer 1

1. Unfavorable prices paid
2. Poor quality of supplies ordered resulting in long periods of down time to correct.
3. Further costs for replacements.

Question 2

What are the recommendations for the deficiency ‘No approved supplier list’ in an deficiency appendix?

(4)

Answer 2

1. Compile approved supplier list by researching:
   -suppliers prices for best rates.
   -quality of products.
   -supplier’s ability to meet delivery requirements.
2. Final list approved by senior management.
3. Communicate approved list to those reasonable for ordering.
4. Update approved list regularly.

Question 3

What are the consequences for the deficiency ‘No business continuity plan’?

(5)

Answer 3

1. System failure result in loss of accounting data + management information.
2. Employees may be unaware of responsibilities in event of system failure.
3. Hinder efficiency of operations.
   4 .Loss of customer + supplier goodwill affecting reputation.
4. Additional costs to recover data.

Question 4

What are the recommendations for the deficiency ‘No business continuity plan’ in an deficiency appendix?

Answer 4

Computer files back up regularly.
Backup stored at a separate location.
Insurance sufficient to facilitate recovery and cover loss of profits.
Documented plan of an event of system failure.

Question 5

What are some general recommendations for deficiencies?

Answer 5

Training employees in relevant procedures.
Disciplinary actions for employees failing to follow procedures.
Monitoring of compliance with procedures.

Question 6

What is a consequence of the deficiency in ‘Asset Verification / Non-updated FAR’?
(4)

Answer 6

Assets overvalued:
Assets in FAR may not exist / stolen.
Assets undervalued:
Additions during year not recorded.
Assets still in use but W/down

Incorrect Capital Allowances.
Depreciation being charged on obsolete items.

Question 7

What are some recommendations to address the deficiency in ‘Asset Verification / Non-updated FAR’?
(3)

Answer 7

1. Regular reconciliation of FAR + asset by responsible person -
   Separate from custodian of asset.
2. Asset to Register = Completeness
3. Register to Asset = Existence

Question 8

What are the consequences of the deficiency ‘lack of content of management accounting information e.g. no tracking of loan covenants’?

(2)

Answer 8

1. Non-compliance: Loan withdrawal, fines, penalties.
2. Increased risk of GC assumption.

Question 9

What are the Recommendations of the deficiency ‘lack of content of management accounting information e.g. no tracking of loan covenants’?

(2)

Answer 9

1. Cash flow forecast prepared annually including sensitivity analysis.
2. Agenda of directors meetings needs to include review of cash flow forecasts and bank loan compliance.

Question 10

What are the consequences of ‘amendments being made by Directors on Oral authority’?

(5)

Answer 10

1 .Misunderstanding > incorrect amendments.
2. Higher prices > loss of customer goodwill.
> Reduce demand for product.
3. Unauthorized amendments.
4. Sub-optimal amendments > lower profits > adverse effects on cash flow.
5. Risk of Misstatements in FS.

Question 11

When a deficiency is related to price changes, what should you consider?

Answer 11

What is the impact on the business if the prices are raised too high?
What is the impact on the business if the prices are too low (sub-optimal)?

Question 12

What are the Recommendations of ‘amendments being made by Directors on Oral authority’?

(2)

Answer 12

Standard form of amendments each time signed off by Directors.
Periodic checking of all prices to authorized price list.

Question 13

What are the consequences of ‘not having any bribery prevention policies in place’ ?

(5)

Answer 13

1. Bribery Act 2010 makes failing to prevent bribery a criminal offence.
2. Absence of policies > employees accepting bribes without realizing.
3. Risk of non-compliance > fines, imprisonment, legal fees.
4. Investigations > loss of reputation > decline in sales.
5. GC

Question 14

What are the Recommendations of ‘not having any bribery prevention policies in place’ ?

Answer 14

Document / implement prevention policies.
Training / Disciplinary action.
Designated person for compliance.
Monitoring of policies.