Question

You have recently taken over the role of the Chief Financial Officer of GT Gold Chasers Ltd. (“GT Gold”). GT Gold is junior mining company, that is hoping to hit it big with their next mining venture. You work out of the head office that is based out of Vancouver. GT has got a reputation in the industry for being quick to act, and the management team are known for pushing the envelope to get results. There has been a high turnover of people in the last two years, and the current team are mainly new to the job.

During your first few weeks on the job, you have noticed a few “oddities” around how things in the office run. A couple of examples of these are as follows:

Your assistant staff accountant, Stella Monibag helps you with the preparation of the accounting financial statements for the company. Stella spends her days reconciling the bank accounts of the company on a daily basis, which is great, because you need to know how much cash you have in the company at all times. Once she has reconciled the accounting general ledger to the bank statement, she prepares all the cheques for the new bills that needs to be paid. You have the authority to sign the cheques, but when you are out of the office, Stella is also able to sign these cheques or approve payments on your behalf. Stella keeps the cheque book on her desk so that she doesn’t lose it easily. Once you have approved a payment, Stella will access the company accounting system to enter the transactions in the general ledger.

Recently the company started to pay some larger invoices to vendors that you have never really heard of. One the vendors, SM Consultants Inc. provided printing services, a piece of furniture and six hours of printing consulting. These were not expected costs, but you are new to the office, and you figure that it will probably sort itself out later.

2.a) Please advise provides commentary on any internal control weaknesses that may exist in GT Gold, based on the above information .

2.b) Please provide three possible solutions to the internal control weaknesses you have identified above, and how these will help solve the control weakness .

2.c) Provide some commentary and two examples regarding things you would try to change in the organization to address internal control risk (hint: refer back to the Fraud Triangle model discussed during class), and how these changes would impact the company .

Answer 1

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Answer. 2c)

These controls ought to be reconsidered on a normal premise to guarantee that they are working appropriately and still meet their destinations. When planning inward control strategies, there are some normal dangers that each association ought to consider, including:

The board Override of Controls –

Management is principally liable for the plan, usage, and upkeep of inward control and in this manner, there is the inborn potential for the executives to supersede these controls. In the event that an official has the capacity and an impetus –, for example, income targets or individual money related issues – to supersede controls and submit misrepresentation, it is a hazard not effectively survive. It requires those accused of administration, for example, the investors, Board of Directors, or Audit Committee, to adopt a functioning strategy in assessing the chance of misrepresentation happening at the association and building up extra strides to control the danger of the board abrogate if these extortion dangers are recognized. Furthermore, establishing the correct pace at the top can support the association and its workers keep up their uprightness.

Constrained Segregation of Duties –

No single individual ought to be liable for the approval of exchanges, recording of exchanges, and care of the affected resources of exchanges. Littler associations may experience issues executing appropriate isolation of obligations because of constrained staffing, albeit bigger organizations can likewise have issues if the isolation isn't appropriately structured. Littler associations need to actualize repaying controls to help guarantee the targets are met, for example, oversight, oversight, and checking by the executives or those accused of administration.

Overreliance on Detective Controls versus Precaution Controls – Aanalyst controls will distinguish in the case of something isn't right, it might be past the point of no return and the harm may have just been finished. A decent interior control framework has criminologist controls, yet in addition has precaution controls. Preventive controls can incorporate things, for example, progressing preparing of arrangements and methodology, actualizing client names and passwords to restrict access to the framework or modules inside the framework, requiring double marks on payment, or directing a survey and endorsement of procurement demands preceding buy.

Casual versus Formal Controls –

Smaller associations may have key controls that are performed at the element level versus at the action level. These substance level controls are commonly less formal and performed by a couple of key people, for example, the proprietor or supervisor. Whether or not controls are casual or formal, they should be effectively observed to guarantee they are being performed.

Excessively Trusting –

When we hear accounts of extortion, regularly the culprit is portrayed as being straightforward, reliable, and an incredible worker whom you never suspected. An association should confide in its workers to be acceptable representatives and carry out their responsibility as well as could be expected, yet this trust ought not lessen its interior controls. In the expressions of Ronald Reagan, "Trust, yet confirm."