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Internal Control and Risk Evaluation - Essay Example


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Internal Control and Risk Evaluation

The company is relying on sale invoice as the only source document to claim payment on sales. This may create an avenue for collusion between buyer and store keepers; thus, the company should consider maintaining sales record for easier reconciliation of sales units recorded as sale out and invoice records (Kumar & Sharma, 2005). To enhance efficiency, the source document should be prepared by an independent person other than the person receiving the orders to minimize chances of collusion. All the cash collection should be recorded on cash register and deposited on a daily basis. This should be followed by monthly reconciliation between the cashbook and the bank statement to identify any deviation for corrective actions. The firm should develop measures for making follow up of bad debts before writing off at the income statement. These measures include factoring debts as it will ensure a steady flow of revenue and limit chances of bad debts to the firm (Hightower, 2008). With analysis of the account payable data flow chart, the chart does not show the breakdown of the various stages involved in making payments. There is only one point that satisfies all the payment claims; this posses a great risk to the firm because the company may end up paying to dummy accounts. The company should ensure segregation of duties at this point to incorporate verification stage, calculation of figures and authorization stage as it will eliminate chances of collusion. In this company payments made through

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internet transfer, poses great risk of money loss to the company. The company should ensure that payment to any account is authorized and that all details confine to the client specification. The data to this account should be encrypted to ensure secure transfer. The chart does not indicate a specific time for payment; the company should have predetermined dates for payment to ensure that special arrangements are made such as security over cash payment (Hightower, 2008). The company should have a payroll flow chart that has ways of recording the total time worked. This will minimize the chances of paying for idle time. The firms are paying it wages through bank account; thus, it should ensure monthly wages reconciliation on recorded wages claimed and the bank statement. This will enable the firm to identify the dummy workers and any fictitious payment made through the bank. It will also help in identifying the unclaimed wages, so that appropriate actions can be taken to identify the employees who never claimed their wages. The duties of preparing the payroll should be segregated and rotated on a regular basis to ensure that wages are not inflated and that no dummy workers exist. The firm should ensure that workers identify themselves as the report, when leaving and when claiming wages to detect ghost workers (Kumar & Sharma, 2005). The firm has an inventory purchase flow chart that delineates the ordering process of goods and how they are paid for. However, the chart does not cover all the risks exhaustively; the chart does not show any recording on purchases received by an independent person for easier reconciliation. Stock always form substantial cost in most of the organizations; therefore, procurement procedures should be highlighted clearly. The chart does n


Topic: Internal Control and Risk Evaluation Date: The system has tried to analyze inherent risks that revolve around sales, account payable, wage payment and inventory. In relation to sales control do not incorporate the procedures for evaluating and classifying new clients…
Author : dorcas27
Internal Control and Risk Evaluation essay example
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