Special Ordering System Issues in Platinum Industries

The accounts payable team ties the order received with the open orders, and debits the equipment account accordingly. The accounts payable team ties the order received with the open orders, and debits the equipment account accordingly. Weakness in the Internal control of the system Effectiveness of the system is very much required for the overall development of the company.

Audit
2017

1
By student name
Professor
University
Date: April 30 , 2018.
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Executive Summary
In this assignment the case of platinum industries is discussed and the issues that they have
faced with their special ordering system. The overall internal controls of the company and the
associated issues along with it are discussed and recommendations are given. These are special kind of
orders that are given by the management of the company and the entire assignment is based on the
same. In the long run the overall internal controls of the company are discussed and the associated
recommendations are provided.
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Contents
Question 1…………………………………………………………………........................................................4
Question 2…………………………………………………………………………………………………………………….….4
Question 3…………………………………………………………………………………………………………………….….8
Refrences.....……………………………………………………………...........................................................11
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1.In this special ordering system the company has spent $13million in total. The overall range of
the equipment is categorized under two departments $3000 to $30,000 and the total payment
is divided into two categories of more than $10,000 and less than $10,000. The entire system of
the company deals with the overall supply, delivery and purchase of these special equipment for
the company. There is a different trail through which these orders are placed by the company
and the management of the company must maintain the validity of the same. There are some
issues with regards to this system and the same needs to be taken care by the entity and its
management.
.
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Special Purpose
Ordering
system
Purchasing Department
A purchase requisition form is filed
by the buyer and the same is
checked and given to the supplier.
The Receiving
department receives
the order, and
informs the buying
authorities after
stamping the same.
The accounts payable team
ties the order received with
the open orders, and debits
the equipment account
accordingly.
The treasurer and the
cashier signs the cheques
and authorises the payment
for the company

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3.
1. Weakness in the Internal control of the system  Effectiveness of the system is very much
required for the overall development of
the company. If the internal controls are
weak it would lead to long term losses for
the management of the company. It
would also lead to unprecedent errors
that the management needs to take care
of. If the controls are not in place
effectively then the business would not
be able to function out rightly. This will
hamper the overall progress of the
company in the long run and can cause
huge loss. So, it is very important that
timely audit of internal controls in the
system must be done to maintain
effective productive and growth (Abbott
& Kantor, 2017).
 Low Segregation of Duties – One of the
biggest drawback is that there is no
proper segregation of duty among the
members of the company. Some of the
employees have been given so much
authority that they can misutilised it very
easily. Just like in the case of cashier who
has been given the authority to authorize
payments that are less than $10,000 and
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sign cheques regarding it. So, this is
where the cashier can misutilised the
funds of the company because the
management is having no control over it
and this can cause major loophole in the
functioning of the company. Segregation
of work is important to keep a check on
the activities of the employees, it helps to
make sure that the employees are giving
their best and are not misutilising their
positions in the company (Alsagoff,
2010).
 Verbal Orders – This is also one of the
loophole in the special ordering system.
Most of the orders are verbal in nature
and once received the same is entered by
the officers in the register. This leads to
no direct confirmation from the
customers on the total amount of
products required by them. Verbal orders
are very bad as it leads to poor or no
documentation. If documentation is not
there, there is no proof and thus it might
also cause issue in the overall audit of the
purchase system and thus in the long run
affect the accounts of the company
(Golden, 2006). One thing that should be
noted is that the management should
take steps to ensure that these orders
are recorded properly and should be
updated on a timely basis by the
company. Written documentation is the
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best form of proof that the company can
provide.
 Non -maintenance of books and
accounts – In case of the Platinum
Industries the company is not
maintaining proper books and accounts
of the company and thus that might
cause huge loss to the company as the
auditors would fail to audit the books
properly. The company is debiting the
equipment account before the order is
delivered by the company. The accounts
clerk is filing the purchase order as paid
on the due dates even the same has not
been approved by the authorities of the
company. This will lead to
mismanagement in the overall
functioning of the company (Chariri,
2017). It would also provide a wrong
picture to the investors of the company.
They will not get the true and fair view of
the company and its accounts with
regards to the functioning of the
company, in relation to the special-order
system for the company.
2. Impact of the Internal Control Weakness Internal control forms the backbone of any
company. In case it is weak the company will not
be able to function and put its best foot forward,
it would also hamper the overall progress of the
company in the long run. It is very important that
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management should take effective steps to
ensure that the internal controls are strong, in
case they are weak the management of the
company would be held responsible (Ghofiqi,
2018). It is harmful for the long-term
development of the company and its progress.
The company should take expert opinions in case
they want to. Experts would help the company to
progress by giving proper suggestions. The
management should help the company to
progress in the long run.
3. Conclusion and Recommendations
Internal Controls should be optimized.
 The management of the company should
take such steps that would help in the
optimization of the internal controls of
the company, they should get timely
audit done so that all risk related
elements can be discovered and steps
can be taken in that regard to remove it.
The management should also see to it
that while designing internal controls it
should be such that it covers the entire
system from the initiation of the order to
the delivery. This is extremely important
in the long run. The company should take
help from auditors to design the internal
control measures for the company and
maintain highest level of success
possible. Proper audit trails would help in
keeping a track of the number of orders
received and dispersed by the company
(Kusolpalalert, 2018).
 Keeping a check on the employees of the
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company is very important, in case they
are falsifying the accounts it can easily be
checked by the management of the
company and control can be established
in the long run.
 Timely audit should be done. It should be
checked that the purchase register of the
company is timely audited and produced
to the management of the company. All
the transactions related to cash and bank
should be merged and checked to ensure
transparency and validity of the system.
4. IT related Practices Development of accounts have helped in huge
development in the IT related practices for the
company and has ascertained their long-term
growth. It has helped in solved the issues faced
by the company and made it easier to cope with
the related pressure (Webster, 2017). It also
helps in saving a lot of time and helps the
company in completing the orders in time. The
company can also take help from IT experts on
how they can introduce IT related practices in the
system. Few of the IT procedures that can be
introduced in case of Platinum are –
 Electronic Forms – These forms can be
used by the company to place orders and
thus it will help in keeping a proper
documentation of the number of orders
received by the company and number of
orders discharged. It will also suffice the
needs of the audit trail of the company.
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 Electronic Fund Transfer – The company
should change its payment system and
should make it more digitalized, with
total payment being received through
electronic fund transfer and not through
cash and cheques, this would help in
keeping a tab on the total amount
received and provide a trail to the
auditors of the company.
 Electronic Data Interface – Nowadays
most of the business has gone online,
which means people are making use of
App based system to deal with
customers. This gives them more visibility
in the market and promotes long term
sustainability and growth. Thus, most of
the companies are switching to these
software that can help them in the long
run. It would also help in attracting more
customers for the company.Thus
switching to an online interface would be
best for the long term success of the
company and would also help in solving a
lot of relatable problems with the system
of the company (Vieira, O’Dwyer, &
Schneider, 2017).
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References
Abbott, M., & Kantor, A. (2017). Fair Value Measurement and Mandated Accounting Changes: The Case
of the Victorian Rail Track Corporation. Australian accounting Review.
Alsagoff, N. (2010). Microsoft Excel as a tool for digital forensic accounting.
Chariri, A. (2017). FINANCIAL REPORTING PRACTICE AS A RITUAL: UNDERSTANDING ACCOUNTING
WITHIN INSTITUTIONAL FRAMEWORK. Journal of Economics, Business and Accountancy, 14(1).
Ghofiqi, M. (2018). FORMATION OF VIEWS AND INTERESTS TO THE ACCOUNTANTS PROFESSION IN
MASTER OF ACCOUNTING STUDENTS OF JEMBER UNIVERSITY FORCE OF 2016 USING
STRUCTURATION THEORY ANALYSIS. THE 3RD INTERNATIONAL CONFERENCE ON ECONOMICS,
BUSINESS, AND ACCOUNTING STUDIES.
Golden, T. W. (2006). A Guide to forensic accounting investigation. Hoboken: Wiley.
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Kusolpalalert, A. (2018). The relationships of financial assets in financial markets during recovery period
and financial crisis. AU Journal of Management, 11(1).
Vieira, R., O’Dwyer, B., & Schneider, R. (2017). Aligning Strategy and Performance Management Systems.
SAGE Journals, 30(1).
Webster, T. (2017). Successful Ethical Decision-Making Practices from the Professional Accountants'
Perspective. ProQuest Dissertations Publishing.
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