Internal Control System

Running head: INTERNAL CONTROL SYSTEM
Internal Control System
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Internal control system
Table of Contents
Introduction:...............................................................................................................................2
Question 1..................................................................................................................................2
Question 2..................................................................................................................................4
Question 3..................................................................................................................................5
Question 4..................................................................................................................................7
Question 5..................................................................................................................................8

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Internal control system
Introduction:
Question 1
Situation a)
In this case, the same employee orders the merchandise and approves invoices for
payment; the company discount pharmacy will face the challenge of internal control
weakness. as the same person is engaged in giving the order and also approves the invoice it
may be possible that the person can manipulate the invoice and as he has the power to
approve the invoice he can pass any amount or figure without the consent of the higher
authority. by giving high amount of orders he can take bribe from the suppliers and the
company will not get any information about the fact (Akhmetshin, et al 2018).
In this case, the company can employ another person who will be authorised to give
orders and send the same list of orders to the higher authority for audit, there by gets approval
of the order, and based on that approval the invoice will be prepared and send to the
suppliers. This process will be more scientific and ensure more transparency in the order
processing system. The process will prevent the weakness in the internal control system of
the company.
Situation b)
In this situation, the storeroom supervisor without knowing the actual reason that why
the count for a given quantity is below the reorder level merely sends the list to the accounts
payable clerk and the clerk also without informing the purchase department sends a mail
directly to the vendor. This process is very in efficient as it may be possible that the vendor
has supplied the actual quantity and the goods were stolen after it enters in the premises of

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Internal control system
the company. Therefore, in this case the company should be more cautious about the entire
process of counting and recording of the items in more controlled way (Sunny et al 2017).
In order to prevent such activities the company should instruct the storekeeper to give
a list of the items after a proper counting and make physical verification of every items. The
audit clerk should also first give a mail to the higher authority before preparing a purchase
order.
Situation c)
In this case, the payroll department has made a huge mistake by recording a wrong
figure of in the payroll transactions. This effects the payment of wages and that will affect the
entire accounting system.
In order to prevent this, the company should appoint a internal auditor who will cross
check the records of the payroll department on monthly basis and that will increase the
e3fficiency of the internal control system (Mahadeen et al 2016).
Situation d)
The manager of one store has wants to stop the process of depositing cash on regular
basis and suggest to deposit the cash on weekly basis in order to reduce the time spend in
depositing cash on regular basis. This suggestion is good but this can create problems in
managing cash, as at the end of the week it may be possible that huge amount of cash is
required to be deposited which may become risky while transferring from the store to the
bank (Aziz et al 2015).
So in order to avoid the situation company may deposit on the third day of each week,
that will ensure more safety of the cash, and the problem of managing bulk amount of cash
can be avoided.