Corporate Credit Card Risk Management

This assignment analyzes the risks associated with the introduction of corporate credit cards at BucksPhyz, focusing on potential fraud and unauthorized transactions. It recommends forming a dedicated team to monitor credit card usage and restrict card issuance to key personnel. The document also provides specific guidance for the CEO on implementing effective internal controls and mitigating risks related to corporate credit cards.

Running head: ACCOUNTING INFORMATION SYSTEM
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Name of the University:
Accounting Information System
Author Note

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Executive Summary
The issue that has been presented in the case study is that being the accountant of Bucks
Phyz., it has been asked to review the sales process of the company on the basis of the key
information. The proposal by the CEO of the company in relation to the introduction of the
corporate credit cards has also been analyzed.
This particular study aims to provide an overview into the internal controls that may be
implemented into business for the purpose of essentially avoiding frauds. The particular internal
controls like the segregation of duties and effective employee training has been discussed.
Moreover, it has been stated that the introduction of the corporate credit cards would be
beneficial for business provided that the specific controls have been implemented.

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Table of Contents
Introduction......................................................................................................................................4
Overview of the sales process..........................................................................................................4
Internal control issues in Buck Phyz sales process..........................................................................5
Introduction of corporate credit cards..............................................................................................7
References........................................................................................................................................8

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Introduction
Bucks Phyz is a company that has a medium size and obtains an annual turnover of $2.5
million. The particular issue that has been highlighted in the question is that the accountant of the
company has been asked to review the sales process of the company on the basis of the key
information that has been derived from the staff interviews. As mentioned in the case study the
company has gone through a restructuring program within the sales team which hugely impacted
the operating environment of the company. It has been further mentioned in the case study that
the change in the key personnel might have affected business. Bucks Phyz also has been going
through fraudulent behavior in the accounts department. Therefore, the present circumstances of
the company are such that it cannot afford to incur any kind of revenue leakage. Thus, the
internal control that is needed to be implemented within business has been evaluated in this
particular study. Moreover, the decision of the introduction of the corporate credit cards has been
analyzed. This study aims to provide an understanding of the internal controls that are an
essential part of corporate governance and the how these controls effectively enhance the
successful carrying out of the business operations.
Overview of the sales process
The particular sales process that has been adopted by business revolves around the new
pricing tool that is utilized by the sales managers for the accurate calculation of the prices of the
offers that are sent out. The particular fact that should be noted here is that the authorization in
regards to the sales process is not adhered to, strictly by the managers. The Head of Sales, Barry
has evidently stated in his interview that tough there is a standardized process in relation to the
authorization policy, it has still not been mapped. The other issue associated with the sales
process is that the standard contract template is not of desired quality. Lastly, the credit check
process that involves the checking of the credit worthiness of a particular customer appears to be
error free. The credit worthiness of a customer is checked from the agency website and the credit
is granted to the customer if the rating is anything other than C. If the rating is C then a different
payment method has to be negotiated.

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Internal control issues in Buck Phyz sales process
The effective reviewing of the sales process has led to identification of the following
weaknesses in the business operation of the firm.
Sales Process Internal control
weakness
Impact Recommendation
Data entry The new customer data
that is entered into the
pricing template is not
reviewed effectively as
this according to the
management would be
irrational and would
affect the cost benefit
ratio (Mihret, 2014).
The impact that such a
internal control
weakness could have is
that the data related to
customer might be
wrongly entered into the
system which could lead
to potential loss of
customer or may
tantamount to breach of
customer data security
(William, Glover &
Prawitt, 2016).
Segregation of duty in
regards to the
responsibility of
reviewing the data that
is entered into the
pricing template would
be beneficial for
business. the particular
recommendation that is
applicable in such a
situation is appointment
of an employee in
reviewing the pricing
template data
New Pricing tool The new pricing tool
that has been
incorporated in business
needs the managers to
be effectively trained
for the optimal
utilization of the tool
(Mihret, 2014).
The lack of effective
training might lead to
the wrong calculation of
the offer prices which
may affect business in a
negative way (Li, 2015).
Proper training in the
utilization of the new
pricing tool should be
provided
Authorization Policy The standardized
process that is set up by
the management in
regards to the sales
authorization policy is
The fact that the non
compliance to the
standardized process to
the authorization policy
is permitted by the
The standardized
process that has been
established by the
management should be
modified and the strict

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not strictly followed by
any manager. This fact
is known by the Head of
Sales and is effectively
supported as according
to his opinion the
existence of certain
issues and constraints
might restrict the
adherence to the
standardized process.
(Boyle, 2015)
managers, broaden the
scope of fraudulent
activities by the
managers. The
managers may send
offers to the customers
at prices that are much
greater than the real
value of the offer
(DeFond & Lennox,
2017)
adherence to such a
process should be
mandated in order to
avoid the occurrence of
fraudulent activities
Credit Check Process The particular credit
check process
incorporated and
utilized by the company
appears to be without
error. However, the
particular issue that is
reported by Lucinda is
that there have been
several instances in
which the credit checks
had been performed on
new customers after the
sales contract was
signed by the both the
parties and that the
invoices had been
issued. Therefore, the
lack of strict adherence
to the credit check
process may lead to the
granting of credit to the
The impact that the lack
of adherence to the
credit check process
may have is that it may
lead to a huge loss
incurred by the
company as the credit
may be granted to a
party who is unable to
repay it (Abernathy
2015).
The evaluation of a
particular customer in
terms of credit
worthiness should be
mandatorily executed.
The system should be
such designed that
omitting to check the
credit worthiness of the
customer would not
permit a manager to go
forward with the
particular deal.

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unworthy customers that
may lead to a potential
loss (Mitra, Song, &
Yang, 2015).
Introduction of corporate credit cards
The introduction of the corporate credit cards may turn out to be hugely profitable for
business stated that the transactions for the purchase of services or products that are processed
via the credit cards are applicable and really necessary for business. The introduction of the
corporate credit cards broadens the risk scope of business by leaps and bounds. However, the
numerous advantages that are enjoyed by business due to the providence of the corporate credit
cards cover up for the potential risks faced by the business. The introduction of the corporate
credit cards will effectively reduce the hassles that are related to the transfer of payments by the
company to the supplier’s account. Furthermore, the introduction of the corporate credit cards
will also hugely simplify the process of reimbursement thus, reducing the cost of operations
(Knechel & Salterio, 2016).
The particular internal control that should be implemented by the management of
BucksPhyz in order to minimize the impact of the risks related with the introduction of the
corporate credit cards is that a particular team should be formed in order to monitor the
transactions that are conducted via the corporate credit cards. The finance department staff
should be selected in order to form the group for the purpose of authorizing the transactions that
are incurred with the corporate credit cards so that no fraudulent activities are carried out (Wu &
Tuttle, 2014).
The particular recommendation to the CEO of the company would be that the issuance of
the corporate credit cards should only be restricted to the key personnel, who are involved with
the core processes of business. For instance, the situation that has been mentioned in the booking
of the training course could be paid for, by the corporate credit cards that would have been
allotted to the core human resource personnel after proper authorization by the finance team
(Abbott, 2016).

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References
Abbott, L. J., Daugherty, B., Parker, S., & Peters, G. F. (2016). Internal audit quality and
financial reporting quality: The joint importance of independence and competence.
Journal of Accounting Research, 54(1), 3-40.
Abernathy, J., Hackenbrack, K. E., Joe, J. R., Pevzner, M., & Wu, Y. J. (2015). Comments of the
Auditing Standards Committee of the Auditing Section of the American Accounting
Association on PCAOB Staff Consultation Paper, Auditing Accounting Estimates and
Fair Value Measurements: Participating Committee Members. Current Issues in
Auditing, 9(1), C1-C11.
Boyle, J. F., Gramling, A. A., Hermanson, D. R., & Hermanson, H. M. (2015). Audit committee
material weaknesses in smaller reporting companies: still struggling. Journal of Forensic
& Investigative Accounting, 7(1), 110-121.
DeFond, M. L., & Lennox, C. S. (2017). Do PCAOB Inspections Improve the Quality of Internal
Control Audits?. Journal of Accounting Research, 55(3), 591-627.
Knechel, W. R., & Salterio, S. E. (2016). Auditing: Assurance and risk. Taylor & Francis.
Li, C., Raman, K. K., Sun, L., & Wu, D. (2015). The SOX 404 internal control audit: Key
regulatory events. Research in Accounting Regulation, 27(2), 160-164.
Mihret, D. G. (2014). How can we explain internal auditing? The inadequacy of agency theory
and a labor process alternative. Critical Perspectives on Accounting, 25(8), 771-782.
Mitra, S., Song, H., & Yang, J. S. (2015). The effect of Auditing Standard No. 5 on audit report
lags. Accounting Horizons, 29(3), 507-527.
William Jr, M., Glover, S., & Prawitt, D. (2016). Auditing and assurance services: A systematic
approach. McGraw-Hill Education.
Wu, Y. J., & Tuttle, B. (2014). The Interactive Effects of Internal Control Audits and Manager
Legal Liability on Managers’ Internal Controls Decisions, Investor Confidence, and
Market Prices. Contemporary Accounting Research, 31(2), 444-468.