Question

REQUIRED: For each of the weaknesses listed below, identify an internal control that addresses those weaknesses. Note, the internal control CAN BE, BUT DOES NOT HAVE TO BE, an input edit control.

LIMIT YOUR ANSWER TO ONE PAGE. ORGANIZE YOUR ANSWER AS FOLLOWS:

WEAKNESS INTERNAL CONTROL

Terminated employees remain on the payroll

Unauthorized vendors are used

Payments are made for quantities not received

Cash is lost in the mailroom

The wrong price is entered on sales orders

Shipments go unbilled

Sales are made to customers who do not pay

Vendor invoices are paid without being vouched

Paycheck names and amounts are altered after issuance

Raises are posted to the employee files by Payroll personnel

Answer 1

WEAKNESS INTERNAL CONTROL.

1 payroll control:

* audit: have either internal auditors or external auditors conduct a periodic audit of payroll fucntion to verify whether payroll payments are being calculated correctly.

* change authorizations: the same control applies for any pay rate changes requested by a manager.

* error checking repors.

* issue payment reports to supervisors .

* restrict access to records.

2 unauthorised vendor are used.

* Separation of duties.

ensured that payments documents are process correctly by having different people involed in payment process.

* Accountability, authorization and approval.

Accountability ensure that you authorize,review,and approve invoices for payments based on singed agreements,contract terms,and purchase orders.

*review and recociliation.

your reconciliation activities confirm that you are paying for approved purchases and are being billed correctly. perform monthly reconciliations to catch improper charges and validate transactions.

3 Payments are made for quantities not received.

* so there is proper internal control for this issue which includes.

• purchase orders.
• receiving reports.
• vendor invoices.
• common technique for verifying vendor invoice is.

documents. what it shows.

1 companys purchase orders . what the co.had ordered and at what cost.

2 company receiving report. what the company has received.

3 vendor invoice. what the vendor billed for company.

* vochers.

* Vendor involves without purchase orders or receiving reports.

* statements from vendors.

4 Cash lost in mailroom.

* Route check receipt to mailroom first.

*Accounts Receivable clerk credit the A/R.

* Chief accountant reconciliation bank statement with cash ledger.

*adding more features on the check receipt control.

* cashier matches the cgeck received list to check receipt slips.

5 Wrong price are entered on sales orders.

* Incorrect sales prices,discounts and credit.

* sales being incorrectly recorded or not recorded.

* payments not received.

6 sales are made to customer who do not pay.

* segregation of duties.

* sales recorded only approved sales order form and shipping documentation.

* accounting for numerical sequences of invoices.

* monthly customer statements sent out and customer queries and complaints handled independently.

* Authorization of credit terms to customer.

* orders not accepted unless credit limits reviewed first.

* authorized price list and specific terms of trade in place.

* accounting for numerical sequences of invoices.