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Internal Control and Risk Evaluation - Essay Example
Author : dorcas27
Finance & Accounting
Pages 3 (753 words)
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…
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. ...