Task 1. Identify Control Weaknesses Flashcards
Weaknesses:
- Lack of written procedures. (Organisation)
- Lack of adequate supervision by line manager. (Supervision)
- Lack of Segregation of duties (Segregation)
- Absence of management checks:
(Arithmetic accounting.. reconcile ctrl acc. & Management .. review variances) - Lack of awareness of implication not taking holiday.
Internal control system:
Controls
supported by strong ethical values, example
SOAP SPAM
1. Segregation - of duties
- Organisation - defined roles; instructions; eg. stated authority levels; use only approved suppliers..
- Authorisation - above certain amount; restricted access; passwords
- Physical - Locked up petty cash. Also locked up physical records eg. payroll
- Supervision - Line manager
- Personnel - Qualified, competent staff (who notice eg holiday absence) KKB Performance review.
- Arithmetic & Accounting - Reconcile eg wages control. KKB Information processing?
- Management - Management accounts reviewed, investigate variances
Types of fraud
Theft
False accounting or misreporting misrepresentation
Bribery & Corruption
Deception
remember collusion
Impact of fraud
Financial (lost income or assets)
Non-Financial (loss of reputation & future custom, god employees)
Lost of opportunity
Fraud definition
The use of deception with the intention of obtaining an advantage, avoiding an obligation or causing loss to someone else or to an organisation.
Segregation of duties explain
SoD is where no one person is able to completely record a financial transaction from beginning to end.
eg. Cannot raise a sales invoice, then collect and record the cash receipt
SEPARATE:
- recording transaction
- recording it’s settlement
Minimise fraud as requires collusion… less likely
When looking at scenario - remember to look at bigger picture to try and figure out whats going on?
.
If in doubt - Authorisation/ Segregation of duties !!!
Payroll - Ghost employees
Purchasing - Fictitious suppliers
Need to write enough … only 100 marks so need to give more cntent
.
SLCA reconcile to SL - will it detect…
A batch of purchase invoices posted to the sales ledger control account
Yes (BPP QB)
I assume because the TOTALs from the Day book are posted correctly to the PLCA
SLCA reconcile to SL - will it detect…
A pricing error in a sales invoice
No (BPP QB)
I think have to think about day books ie. the invoice is received THEN posted (wrongly) to day book , totals from day book form the PLCA so the 2 match and the error is not detected.
Maybe if the error is in the source document it wont be detected is a good rule?
PLCA reconcile to PL - will it detect…
A pricing error in a purchase invoice
No (AAT P2)
PLCA reconcile to PL - will it detect…
A supplier has been paid twice for an invoice
No (AAT P1)
Reconcile Petty Cash to Vouchers & Float
Shortage discrepancy
Could be caused by…
Addition error of PC Voucher ?
No.
I got this wrong but I think I was thinking of the error being by the reconciler
I think it’s No because the addition was wrong on the voucher but the cash would have been paid according to the total … so it would reconcile as using totals to do the reconcile.
Think of PC vouchers being like Purchase invoices.. a pricing error in an invoice isnt detected either
The statutory duty to report if the FSs presented a true and fair view belongs to ?
Auditors (not directors)
