Question

1. what is segregation of duties based on the given scenario?

   
   

   The significant control risk that has been found is that there is no adequate documents and records. In Sherdian AV, it was Rob himself who was the warehousing assistant despatching the goods and printing one copy for himself and two other copies that were placed together with the goods to be delivered to the customer. The security only checks against the sample of despatch notes that were not originally for the products as none were given to him. Risk that a misstatement could happen in an assertion about the class of transaction, account balance and it includes material which can be individual or aggregated with or misstatements. This will not be prevented , detected and corrected on a timely basis by the organisation’s internal control. The auditor will follow few procedures to gain an understanding over the internal control structure policies and steps for significant financial statement assertions. By either using the checklist or a software aid alongside with the knowledge obtained from the assessment of the entity’s internal control structure , the auditor identifies potential misstatements applicable to specific assertions given the entity’s circumstances. The auditor will mostly assess control risk for assertions about transaction classes such as cash receipts and cash disbursements. Auditor must assimilate information about a various range of possible control policies and procedures related to any of the ICS components. In the test conducted the procedures included are such that samples will be collected and related documents will be inspected. Clients will be inspected and observed, and the auditor’s re-performance of certain controls. The result of the test controls will then provide evidence about the effectiveness of the design and operation of the related necessary control. The degree of assurance increases when In the event of various types of evidence support the same conclusion about the effectiveness of control.
   

   
   

   This is significant when the security only checks the goods in the lorry by a sample of despatch note. This sample would not be the correct document as there are no proper documents given to the security to check if the goods have been correctly stated in the correct despatch note printed by Rob and checked against the sales order. When the goods ordered are in stock then Rob creates a dispatch note and makes two extra copies. The goods are picked from the warehouse. They are loaded onto the lorry for delivery… along with the remaining two copies of the dispatch note. Security checks goods in the lorry to a sample of dispatch notes. Adequate documents and records should be sent to the security before he checks the lorry.

2. There should be adequate documents and records as the internal control so as to check if the goods leaving the premises is in relation to the goods dispatched. Rob should prepare and give the copy of goods despatched to the security to observe goods being picked from the warehouse and loaded onto the lorry for delivery based on the goods despatched note and sales order are correct.

Answer 1

Segregation of duties means that the all the duties related to a process must be assigned to different personnel so that circumstances of fraud can be prevented.

In the above case study, all the warehousing responsibilities are in Rob's hand, hence the activities regarding Loading the goods and preparation of invoice or memo should be handled by different persons.

There should be a proper control by security guards to check the memo and the goods.