Internal Control Weakness and Business Intelligence in Laurel Pty Ltd

Running Head: Business Report
BUSINESS REPORT
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Business Report
Question 1
Internal Control Weakness Impact of the Weakness Control to mitigate the
Weakness
Potential errors and
irregularities in the purchase
circle. It has clearly been
noted that sometimes
purchase orders (PO) remain
outstanding for more than 2
weeks due to errors
committed by the staff in the
purchasing department.
This weakness can create
unreliable records since they
do not indicate the true state
of liabilities owing to the
firm. This can make the firm
incur huge losses as payments
may be done for goods and
services never received.
The firm should employ
adequate staff and segregate
their duties such that each
clerk has specified duties
which they exercise only up
to a specified limit. This will
reduce the outstanding
purchase orders (PO)
significantly as errors
committed at a particular
stage can easily be identified
by the next clerk in the next
stage.
Invoicing errors. Sales
invoice may not be recorded
completely or recorded
incorrectly by the accounts
payable clerk.
Creditors and debtors
misstatements either
overstatement or
understatement can result in
the organization incurring
huge losses. This is because
The firm should adopt the use
of pre-numbered sales
invoices and they should be
issued sequentially. There
should proper maintenance of
journals. All invoices should

Business Report
debtors may pay less or
creditors may be overpaid.
Increased disputes with either
suppliers or debtors due to
errors waste resources in their
follow-up.
be scrutinized independently
before being authorized.
Making payments without
proper documentation and
authorization.
This results in payment of
goods not received or
overstatement of payments to
be made and expenses. In the
case of Laurel Pty Ltd, the
accounts payable clerk, who
on daily routine would
prepare invoices, would also
authorize payments in the
event the accounts payable
manager is on leave. It is
possible to commit fraud and
errors during this period
because the same person
preparing invoices, is the
same who authorizes
payments. Thus chances to
The firm must make it a
compulsory requirement that
before any payment is
effected, all invoices must be
originals and must be
supported with proper and
complete documentation. And
upon effecting payments, all
documents associated with
the payments must clearly be
marked to prevent them being
represented for payments
again.
The firm should also ensure
that payments authorizing
duties are done a separate
independent person other than