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AA Question Rote > Internal Controls Section B (Risks and Recommendations) 2 > Flashcards

Internal Controls Section B (Risks and Recommendations) 2 Flashcards

1
Q

Risk for GDNs not given same number as order numbers they relate to?

A

If GDNs are missing and company fails to raise invoices in a timely manner, could lead to a loss of revenue

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2
Q

Control recommendation for GDNs not given same number as order numbers they relate to?

A

A sequence of check of GDNs should be undertaken to identify any missing despatch notes

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3
Q

Risk if sales order department don’t receive copu of GDN

A

Not able to monitor if orders are being fulfilled on a timely basis, which could result in a loss of revenue and customer goodwill

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4
Q

Control recommendation if sales order department don’t receive copu of GDN

A

GDN should be amended to a four-part with one copy going to sales department

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5
Q

Risk if additional staff are drafted to help sales clerks produce sales invoices?

A

Increase of mistakes being made to sales invoices

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6
Q

Control reccomendation if additional staff are drafted to help sales clerks produce sales invoices?

A

Only sales clerks should raise sales invoices - recruit more sales clerks

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7
Q

Risk if manual entry of discounts?

A

A clerk could forget to manually enter discount or input wrong amount, causing loss of customer goodwill

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8
Q

Control recommendation if manual entry of discounts?

A

Invoice system should be manded to prevent sales clerks from manually entering sales discounts onto invoices

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9
Q

Risk if customer statements not generated and being sent to customers?

A

Increases likelihood of errors and invoice disputes. Which leads to cash flow issues

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10
Q

Control recommendation for customer statements not generated and being sent to customers?

A

Should sent monthly customer statements and send them out promptly

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11
Q

Risk if trade receivables account only reconciled annually?

A

Errors can’t be spotted promptly. Meaning receivables are misstated

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12
Q

Control recommendation if trade receivables account only reconciled annually?

A

Trade receivables account should be reconciled on a montlhy basis. Then reviewed by an authorised employee

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13
Q

Risk that customer orders are given a number based on sales person’s own identification number?

A

Sequential numbers mean it’s difficult to identify missing orders. Which leads to a loss of customer goodwill

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14
Q

Control recommendation that customer orders are given a number based on sales person’s own identification number?

A

Sequence check of orders should be undertaken to identify any missing orders

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15
Q

Risk for when each till has the same login code?

A

If there are cash discrepancies within the register, difficult to ascertain which employees are responsible. Cash is easy to misappropriate

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16
Q

Control recommendation for when each till has the same login code?

A

Each employee is provided with a unique logon code

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17
Q

Risk for when tills are reconcilied to daily sales reading are performed in total for every till rather than each till separately

A

When exceptions arise, it is difficult to identify which till caused differences

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18
Q

Control recommendation for when tills are reconcilied to daily sales reading are performed in total for every till rather than each till separately

A

Reconciliation done on a till by till basis rather than in aggregate

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19
Q

Risk for when daily sales sheets are scanned and emailed to head office?

A

Possibility some sales sheets could be misplaced by restaurant manager

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20
Q

Control recommendation for when daily sales sheets are scanned and emailed to head office?

A

Daily sales sheets should be sequentially numbered and be sent to head office on a daily basis

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21
Q

Risk for cash is stored at safe where safe key is kept under their desk?

A

Risk of significant cash losses due to theft if access to safe key not carefully controlled

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22
Q

Control recommendation for cash is stored at safe where safe key is kept under their desk?

A

Current key lock safe should be replaced with a digital code. This code should be updated regularly

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23
Q

Risk for when cashier is responsible for several elements of cash receipts system?

A

There is a lack of segragation of duties and errors can’t be identified on a timely basis

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24
Q

Control recommendation for when cashier is responsible for several elements of cash receipts system?

A

Key roles should be split between different members of the finance team

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25
Q

Risk for when credit card statements are not reviewed or reconciled straight away?

A

Credit card omissions won’t be identified on a timely basis, results with discrepancies with credit card company

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26
Q

Control recommendation for when credit card statements are not reviewed or reconciled straight away?

A

Cashier should reconcile credit card vouchers to monthly statement received from card company

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27
Q

Risk for no monitoring of student loan deductions

A

Risk of overpayments being made, leading to employee dissatisfaction

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28
Q

Control recommendation for no monitoring of student loan deductions

A

Payroll department should maintain a schedule of payments made to 3rd parties such as the central government

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29
Q

Risk for variances not analysed between budgeted wages and salaries

A

Management needs to understand why variances have arisen

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30
Q

Control recommendation for variances not analysed between budgeted wages and salaries

A

Monthly management accounts should be amended to include an analysis of wages and salaries compared to budgeted costs

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31
Q

Risk for no inter-branch transfers between stores?

A

Customers are less likely to contact individual stores themselves and company losing valuable sales

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32
Q

Control recommendation for no inter-branch transfers between stores?

A

Inter-branch sustem shjould be established between stores, with inter-branch inventory forms being completed for store transfers

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33
Q

Risk for no GRNs not being processed regularly?

A

Result in delays for supplies being paid as purchase invoices can’t be agreed to a GRN

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34
Q

Control recommendation for no GRNs not being processed regularly?

A

Copy of GRNs should be sent to accounts department on a more regular basis

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35
Q

Risk for GRNs only being sent to accounts department

A

Significant level of unfilled orders leading to a loss of sales and stock-outs

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36
Q

Control recommendation for GRNs only being sent to accounts department

A

GRN should be created in three parts

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37
Q

Risk of when supplier statement reconciliaitons can’t be performed?

A

Result in errors in recording of purchases and payables not being identified in a timely manner

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38
Q

Control recommendation of when supplier statement reconciliaitons can’t be performed?

A

Supplier reconciliations should be performed on a monthly basis and should be reviewed by a responsible official

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39
Q

Risk of when high value inventory is stored in warehouses via a four digit access ?

A

Considerable number of individuals are aware of codes. Increases risk of fraud

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40
Q

Control recommendation of when high value inventory is stored in warehouses via a four digit access ?

A

Access code should be changed and only a few employees should be aware of it

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41
Q

Risk of when invoices are authorised by finance director but only paid 75 days after receipt of invoice?

A

Risk that company is missing out on early settlement discounts

42
Q

Control recommendation of when invoices are authorised by finance director but only paid 75 days after receipt of invoice?

A

Policy of making payment after 75 days should be reviewed

43
Q

Risk of when employees can serve friends/family

A

Could give goods away for free or grant unauthorised discounts

44
Q

Control recommendation of when employees can serve friends/family

A

CCTV cameras should be placed in shops to act as a fraud deterrent

45
Q

Risk of when if store needs changing, a junior sales cerk is sent to bank by a till operator to change it into smaller denominations?

A

Risk of cash being misplaced or stolen on the way to the bank

46
Q

Control recommendation if store needs changing, a junior sales cerk is sent to bank by a till operator to change it into smaller denominations?

A

If further smaller denomination notes are required, store manager should authorise member of staff to obtain cash from bank and fully record movements in and out

47
Q

Risk of when overtime reports are authorised atter payment has been made

A

This could result in unauthorised overtime or amounts being paid incorrectly

48
Q

Control recommendation of when overtime reports are authorised atter payment has been made

A

All overtime should be authorised by a responsible official prior to payment being processed by payroll department

49
Q

Risk of when bonus is input by clerk with no additional review

A

Could result in errors or fraudulent entries, leading to increased payroll costs

50
Q

Control recommendation of when bonus is input by clerk with no additional review

A

All entries should be double checked against written confirmation from director by another member of team to ensure any bonuses are correct

51
Q

Risk of when internal audit teams are undertaking performing counts?

A

Internal audit should review controls and perform sample test counts. Not doing the actual count

52
Q

Control recommendation of when internal audit teams are undertaking performing counts?

A

Internal audit counters should sample check counting undertaken by counting teams to provide control over completeness and count

53
Q

Risk of when additional sheets not sequentially numbered

A

Supervisor can’t ensure completeness of all inventory sheets, resulting in understatement of inventory

54
Q

Control recommenadtion of when additional sheets not sequentially numbered

A

Team should enter on a blank sheet that is sequentially numbered, any unused sheet should be returned at end of the count

55
Q

Risk of when inventory sheets not signed?

A

Difficulty to contact counting team if no signatures

56
Q

Control recommendation of when inventory sheets not signed?

A

Inventory sheets should be signed by relevant team upon completion of an aisle

57
Q

Risk of when third party inventory included in count?

A

Results in inventory being overstated if these are not removed from inventory count sheets

58
Q

Control recommendation of when third party inventory included in count?

A

Inventories belonging to third parties should be moved to one location

59
Q

Risk of when assets recorded in the non-current asset register have not been physically verified for some time

A

There is an increased risk of loss, theft or misplacement as there is no check that the assets still exist in their correct location.

60
Q

Control recommendation for when assets recorded in the non-current asset register have not been physically verified for some time

A

Additional resources should be devoted to completing the physical verification of all assets within the register. Any assets that cannot be located should be written off.

61
Q

Risk of when the (HR) department has been busy; therefore, the payroll department has set up new joiners to the company?

A

This is a lack of segregation of duties, as employees are able to set up new joiners in the payroll system and process their pay, this increases the risk of fictitious (“ghost”) or duplicate employees

62
Q

Control recommendation of when the (HR) department has been busy; therefore, the payroll department has set up new joiners to the company?

A

All new joiners set up by payroll should be reviewed and agreed against employee files to confirm that they are bona fide.

63
Q

Risk of when the bank reconciliations are only reviewed by the financial controller if the sum of reconciling items is significant; therefore, some are not reviewed?

A

The bank reconciliations could contain significant errors, but a low overall amount of reconciling items, as there could be compensating errors which cancel each other out

64
Q

Control recommendation when the bank reconciliations are only reviewed by the financial controller if the sum of reconciling items is significant; therefore, some are not reviewed?

A

The bank reconciliations should be reviewed by the financial controller monthly, even if the reconciling items are not significant, and this review evidenced by a signature on the bank reconciliation.

65
Q

Risk of when invoices are authorised by the finance director, but paid only 75 days after receipt of the invoice?

A

There is the risk that Equestrian Co is missing out on early settlement discounts.

66
Q

Control recommendation for when invoices are authorised by the finance director, but paid only 75 days after receipt of the invoice?

A

The policy of making payment after 75 days should be reviewed. Earlier payment should be considered if settlement discounts are sufficient.

67
Q

Risk of when the purchase orders below $1,000 are not authorised and are processed solely by the purchase order clerk who is also responsible for processing invoices?

A

This could result in purchases that are not required by the business.

68
Q

Control recommendation for when the purchase orders below $1,000 are not authorised and are processed solely by the purchase order clerk who is also responsible for processing invoices?

A

All purchase orders should be authorised by a responsible official using a digital signature, regardless of value

69
Q

Tests of control for when the purchase orders below $1,000 are not authorised and are processed solely by the purchase order clerk who is also responsible for processing invoices?

A

Select a sample of purchase orders and confirm that each one has the appropriate digital signature from the authorised signatories matrix.

70
Q

Risk of when Goods received notes (GRNs) are sent to the accounts department every two weeks?

A

This will delay processing of invoices (understanding liabilities) and payments to suppliers as the purchase invoices cannot be agreed to a GRN

71
Q

Control recommendation for when Goods received notes (GRNs) are sent to the accounts department every two weeks?

A

A copy of the GRNs should be sent to the accounts department more often, perhaps daily.

72
Q

Tests of control for when Goods received notes (GRNs) are sent to the accounts department every two weeks?

A

Enquire of the accounts clerk how frequently GRNs are received, to assess if they are sent promptly

73
Q

Risk of when GRNs are only sent to the accounts department?

A

Failing to send a copy to the purchasing department means that it is not possible to monitor the level of unfulfilled orders

74
Q

Control recommendation for when GRNs are only sent to the accounts department?

A

Either the purchasing department should also receive copies of GRNs via email

75
Q

Tests of control for when GRNs are only sent to the accounts department?

A

Review access logs and permissions within the purchasing module to verify that both the purchasing and accounts departments can access GRNs

76
Q

Risk of when supplier statement reconciliations are no longer performed?

A

Errors in the recording of purchases and payables may not be identified in a timely manner

77
Q

Control recommendation for when supplier statement reconciliations are no longer performed?

A

Supplier statement reconciliations should be performed monthly for all suppliers and reviewed by a responsible official

78
Q

Tests of controls for when supplier statement reconciliations are no longer performed?

A

Re-perform a sample of the reconciliations to confirm that they have been carried out appropriately.

79
Q

RIsk for monthly management accounts do not analyse the variances between actual and budgeted wages and salaries; this is because there are no overtime costs.

A

These could arise due to the recruitment of extra employees which was not budgeted or an increase in wage pay out rates

80
Q

Tests of control for monthly management accounts do not analyse the variances between actual and budgeted wages and salaries; this is because there are no overtime costs.

A

Monthly management accounts should be amended to include an analysis of wages and salaries compared to the budgeted costs

81
Q

Risk of each restaurant maintains a petty cash float of $400; at any point in time the receipts and funds present should equal the float?

A

This could be due to sundry purchases without a relevant receipt or voucher. There is also a possibility that the cash is spent on non-business related items or stolen.

82
Q

Control recommendation of each restaurant maintains a petty cash float of $400; at any point in time the receipts and funds present should equal the float?

A

A petty cash log should be maintained so the purchase of sundry items is recorded in the log along with the sum borrowed, date and employee.

83
Q

Risk of the reconciliations of the tills to the daily sales readings are performed in total for all five tills at each venue rather than for each till?

A

It will be difficult to identify which till caused the difference and, therefore, which employees may require further till training or may have acted fraudulently

84
Q

Control recommendation of the reconciliations of the tills to the daily sales readings are performed in total for all five tills at each venue rather than for each till?

A

Reconciliations should be prepared on a till-by-till basis rather than in aggregate and any discrepancies noted should be investigated immediately

85
Q

Risk of daily sales sheets are scanned and emailed to head office on a weekly basis

A

A possibility that some sales sheets could be misplaced by the restaurant manager

86
Q

Control recommendation of daily sales sheets are scanned and emailed to head office on a weekly basis

A

Daily sales sheets for each venue should be sequentially numbered and remitted to head office daily

87
Q

Risk of cashier is responsible for several elements of the cash receipts system

A

There is a lack of segregation of duties and errors may not be identified on a timely basis.

88
Q

Control recommendation of cashier is responsible for several elements of the cash receipts system

A

These key roles should be split between different members of the finance team

89
Q

Risk of cashier is not checking credit card payments have resulted in cash receipts by Camomile Co

A

Risk that receipts of cash by credit card may have been omitted

90
Q

Control recommendation for not checking credit card payments have resulted in cash receipts by Camomile Co

A

The cashier should reconcile the credit card vouchers per restaurant to the monthly statement received from the card company

91
Q

Risk of company values inventories using standard costs, which are not kept up-to-date

A

If standard costs were reviewed 18 months ago, there is the risk that costs are misstated as changes in raw materials and wages inflation may not have been adjusted for

92
Q

Control recommendation of company values inventories using standard costs, which are not kept up-to-date

A

A senior manager in the production department should review all currently used standard costs

93
Q

Tests of control of company values inventories using standard costs, which are not kept up-to-date

A

Obtain a copy of the standard costs used for valuation of inventories, determine when the last review was and inspect for evidence of review by the production director

94
Q

Risk of overtime worked is not authorised before it is paid. The information per employee is collated and submitted to payroll by a production clerk, but not authorised?

A

These reports are reviewed sometime after the payments have been made which could result in unauthorised overtime

95
Q

Control recommendation of overtime worked is not authorised before it is paid. The information per employee is collated and submitted to payroll by a production clerk, but not authorised?

A

All overtime should be authorised by a responsible official before the payment is processed by the payroll department

96
Q

Tests of control of overtime worked is not authorised before it is paid. The information per employee is collated and submitted to payroll by a production clerk, but not authorised?

A

Review the overtime report for evidence of authorisation and note the date to confirm that this was before the payment of the overtime

97
Q

Risk of when discounts given to customers who purchased goods during the 15% off weekend are entered separately on the sales invoices by sales clerks?

A

This could result in giving unauthorised sales discounts as there does not seem to be any authorisation required

98
Q

Control recommendation of when discounts given to customers who purchased goods during the 15% off weekend are entered separately on the sales invoices by sales clerks?

A

During the period of any special offers (e.g. the 15% off weekend), the authorised sales prices file should be updated by a responsible official

99
Q

Risk of when client services managers are given responsibility to chase customers directly for payment once an invoice is outstanding for 90 days?

A

Client services managers are more likely to focus on customer relationships and generating further revenues rather than chasing payments

100
Q

Control recommendation of when client services managers are given responsibility to chase customers directly for payment once an invoice is outstanding for 90 days?

A

A credit controller should be appointed, and it should be their role, rather than the client services managers, to chase any outstanding sales invoices which are more than 30 days old

AA Question Rote (30 decks)

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