In: Accounting
Question No 1: In modern Qatar the development of the economy is rapid; it mainly includes the creation of many companies. However, it is a double-edged sword which may lead to economic development, but it also has a lot of problems with regards to the corporate internal control system. It is found that, most of the problems are from specific aspects and the overall level of internal control audit. You are required to: Analyze the problems of internal control system with reference to Qatar and in general and propose appropriate recommendations for improvement. The views and response expressed should represent your own words. (300 words)
Inadequate documentation :
Documentation provides evidence of the underlying transactions. It is the input to establishing proper financial records. Financial documents should be preserved and filed appropriately. Proper documentation would most probably provide satisfactory answers to most, if not all, financial transaction related questions. Furthermore, adequate documentation will ease the process of compiling financial records and completing tax returns.
SOP / Process not defined :
Business & owners don’t see the need to create written policies and procedures as some small business processes appear to be uncomplicated. However, this is probably one of the most unused control tools where the most value can be added with little effort. An effective procedure can align business objectives and help establish best practice operating procedures
Lack of authorisation
Authorization of number of activities should be there before the commitment of resources. Depending on the size of the business, levels of authority can be introduced to better eliminate the risk of inappropriate spending
Lack of review
Business owners many times get so involved in the day to day operations of the business that they tend to neglect performing basic review procedures. Business owners should take some time and interest in the financial records. This is an important aspect of fraud prevention
Lack of physical security
Lack of physical security of business assets and resources could result in the loss or damage to assets and resources. Access to equipment, petty cash, and check stock should be restricted to appropriate individuals and stored or locked in an appropriate secure location. Computer equipment and networks should be password protected and computer passwords should be changed regularly.
Job roles and responsibilities not clearly defined
Employees are your most important assets and as a small business you are very reliant on your employees. They are representatives with customers, suppliers, and competitors.
Lack of separation of duties
Many businesses are susceptible to fraud by their own employees as they may have a few employees with multiple roles. Each employee should have specific job responsibilities, preferably in writing to ensure there is no confusion in assigned job roles and responsibilities.