Weaknesses in Internal Controls

This document discusses the weaknesses in the internal controls of Desklib's payment and purchasing system, including lack of segregation of duties, absence of strong credit control system, and more.

Q3
The accounts receivable supervisor
The accounts receivable supervisor is known to bill the process without any kind of computer
verification. The supervisor is known to have the ability for altering the forms that are
usually made by the sales associates which is used in preparing invoices. There is also
absence of any control to make sure that the daily invoices is exactly same to the totals of the
charge forms. The supervisor can also make the accounts to be written off as uncollectible
since there is absence of any kind of verification of the account receivable subsidiary ledger.
This can also take place since there is absence of reconciliation of the account receivable
subsidiary ledger. He can also include the collectible accounts in the report which is
published every month that is related to overdue accounts of the bookkeeper.
The cashier
The cashier is known to process the receipts from cash as well as from the sales of the credit
by performing three duties which are recording the receipts, receiving the cash receipts as
well as cash depositing in the bank. The cashier is known to provide the information that is
known to get delayed, incomplete or have been altered. On the other hand the bookkeeper is
known to record the cash receipts. There will be no verification of the accuracy when there is
absence of deposit slip or the check list. Also, the cashier is known to reconcile the monthly
bank statements that is not compatible with handling the cash receipts or cash depositing in
banks.
The bookkeeper
The bookkeeper is present for authorizing the write off of the accounts which are not
collected without any investigation into the details of each of the overdue account. The

established criteria is not at all flexible in nature for writing off the overdue accounts. It also
does not prevent of granting any credit before date when the account will be becoming
overdue in nature. The bookkeeper also have the power of indirectly granting credits without
notifying the credit manager when the account of the contractor have not been written off.
The internal controls comprises of the procedures as well as the policies which have been
adopted by the management of the business for helping them for achieving their objectives
for ensurement of the efficient conduct of the business.
The weakness of the internal controls are:
1. There is absence of any segregation of the duties between the people who is known to
make invoices, verify and post to ledger accounts that will be resulting to unreliable
records as a result of errors.
2. There is absence of any strong credit control system which will be entailing for
carrying out a background check of the customer before the credit sale gets affected.
3. The cheques that are pre listed needs to be attached to the deposit slips which are
verified from the bank the reconciliation of bank by a clerk
4. The individual who will be getting the mail should be the different person who is
known to make deposit since it is known to expose the firm to fraud.
Q4.
Retro Pty Ltd is known to be a manufacturer of the industrial machinery.
The description off the payment as well as purchasing system are:

 The department of the accounts payable is known to check that there is a presence
record of purchase requisition, receiving as well as purchase order for each of the
supplier and then approves the payment.
 The five part pre numbered purchase order is known to be issued by the
purchasing department after the approval of the purchase requisition. The copy 1
is known to be sent to the supplier, copy and copy 3 are known to be sent to the
receiving department. The copy 4 is forwarded to the department of the accounts
payable and the copy 5 is known to be sent to the purchasing department.
 The accounts payable department is known to prepare the voucher of pre
numbered disbursement and then forward it along with the invoice of the supplier,
purchase order, purchase requisition and record receiving to the accountant.
 The financial accountant is known to undertake a sequence check of the
accountable forms at the end of the month. The financial accountant is known to
receive the monthly bank statement. The accountant is known to investigate any
reconciling items and also prepares the bank reconciliation.
 The accountant is known to prepare a cheque for each of the supplier, signs the
cheque and the record it in the journal off cash disbursements. The cheque is then
mailed to the supplier and then the supporting documents are known to be
returned to the accounts payable for filing.
 After the commodities are received the receiving department logs in the shipment
by stamping “order received” on its two copies of the purchase order. This will
then forms the receiving record. One copy is filed in the receiving department to
the accounts payable department,

The internal weakness might be:
 The purchase requisition needs to be initiated by the department which requires raw
materials. Stores should not be issuing the purchase requisition until and unless he
knew that there will be demand of raw materials which will be preventing
overstocking.
 When the commodities are received by the Receiving department after checking of
the damage, one of the copy needs to be sent to the store departments so that he may
vouch for the supplier along with its good type.]
 One of the copy of purchase needs to be sent to the production department which will
be helping to whether the price of the materials are as per the production strategy. In
case of variation they will be changing the quality of the product.
 The cheques should be approved by various authorities for preventing any kind of
fraud by window dressing the cheque with the related supplier.
 One copy needs to be sent to the sore department for cross verifying the items ordered
and then match them with the required items type, quality and quantity.