Platinum Manufacturing Group: Internal Control Weakness Assessment

This report identifies and assesses internal control weaknesses within Platinum Manufacturing Group's purchase process. The primary weakness identified is the lack of proper documentation and the complexity of the current process. The report recommends adopting ICT solutions, restructuring the purchase process by forming dedicated teams, implementing e-procurement, and establishing a monitoring team to oversee purchasing activities. These measures aim to improve documentation, simplify processes, reduce fraud risks, and ensure better resource utilization. The report concludes by affirming the flexibility of the recommended measures and their compatibility with modern IT infrastructure, emphasizing the importance of training and adaptability in implementing these changes for sustainable organizational improvement.

Running head: ASSESSMENT OF INTERNAL CONTROL WEAKNESS OF PLATINUM
ASSESSMENT OF INTERNAL CONTROL WEAKNESS OF PLATINUM
Name of the Student
Name of the University
Author Note

1ASSESSMENT OF INTERNAL CONTROL WEAKNESS OF PLATINUM
Executive Summary:
Purchase process is one of the most concerned process for an organisation because of the
loopholes that exists within it. The complexity with the discussed process is further enhanced
if internal control weaknesses are identified within it. The discussed paper has taken
consideration of Platinum manufacturing group and identified the internal control weakness
existing within it. Depending on the identification recommendations have been made that can
assist in mitigating the identified internal control weakness. The identified weakness was
related to the documentation and complexity of the process for which adoption of ICT and
formulating of team to monitor and carry the process has been recommended. Adopting the
discussed measures may mitigate the challenges associated with the organisational purchase
process. The discussed report has been concluded with reviewing of the flexibility of the
recommended measures and whether or not they are compatible with modern IT
infrastructure of an organisation.

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Table of Contents
Overview of the Expenditure Process for special order.............................................................3
Level 0 data flow Diagram.........................................................................................................4
Identification..............................................................................................................................5
a. Internal control Weakness (ICW)...................................................................................5
b. Impact of ICW.................................................................................................................5
c. Specific Internal Controls...............................................................................................6
d. Flexibility of the recommended measures......................................................................8
Bibliography:..............................................................................................................................9

3ASSESSMENT OF INTERNAL CONTROL WEAKNESS OF PLATINUM
Overview of the Expenditure Process for special order
The head of the department forms a purchasing requisition and sent it to the
purchasing department which is then verified by one of the buyer out of five that the request
has been made by the department head. Post-verification the buyer selects appropriate vendor
and places a verbal order while demanding a price quotation. Then a “pre-numbered purchase
order (PNPO)” is processed and forwarded to different departments. On receiving the PNPO
the receiving department then validates the order and forward it along with the equipment to
the requisitioning depart while notifying the purchasing department. In the next step, the
accounts verify the vendor’s invoice and the PPNO and creates a payable check which is then
forwarded to the treasurer who verifies the demand and signs the check. The expenditure
process of the special orders from purchase to payment is thus completed.

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Level 0 data flow Diagram
Figure 1: Level 0 Data Flow diagram of purchase Process
(Source: Created by Author Using MS Visio)

5ASSESSMENT OF INTERNAL CONTROL WEAKNESS OF PLATINUM
Identification
a. Internal control Weakness (ICW)
The internal control weakness of a purchasing process is defined as the deficiency or
deficiencies cited by the organisation in their financial transaction processes (Zakaria,
Nawawi & Salin, 2016). It forms the perception that the organisation suffering from ICW is
unaware of its financial situation and can cite a negative impact on the goodwill of the
organisation (De Simone, Ege & Stomberg, 2014). The purchase to payment process of the
deemed organisation is full of internal control weakness and the foremost among them is the
lack of proper documentation. On evaluation, it is evident that the organisation uses verbal
notification very much in their purchase process rather than using written notification. The
lack of written notification leads to lack of documentation/records which can create
challenges for different financial operation including tax returns, tracing of data and similar
others.
Additionally, the process of purchasing to payment process is very complexed in the
case of Platinum and the role of the involved stakeholders are even not clear which is evident
from the level 0 data flow diagram attached above. The organisation has different sections for
different purchase processes however, shifting the process from multiple level increases the
complexity and with lack of documentation, in dire situations no one will take the
responsibility for the processes. Hence, it can be stated that there is a need for restructuring of
the purchase to payment procedure of special orders of the deemed organisation.
b. Impact of ICW
The impact of ICW is significance on any organisation and the deemed organisation is no
exception. The identification of purchase details during the auditing process will be very

6ASSESSMENT OF INTERNAL CONTROL WEAKNESS OF PLATINUM
difficult for the organisation because the organisation believes in verbal notifications and no
data is maintained adequately. Additionally, the auditing assist in devising plans for the
future financial investment that ensures the sustainability of the organisation and as the
auditing process would be inadequate due to the ICW, it will cite negative impact on the
organisational sustainability. The purchase data are also needed for filing tax returns and as
the deemed organisation lacks in the discussed field, hence, it can lead the organisation to
face legal constraints which are time consuming and cites very strong negative impact on the
organisation both internally and externally. Additionally, the complexity involved in the
purchase process leads to improper utilisation of the organisational resources which is also
undesirable for an organisation. The improper utilisation refers to the extra effort invested by
the human resources, inadequate informational resources and others (Clinton, Pinello &
Skaife, 2014). Hence, it can be emphasised that the ICW should be omitted in the shortest
possible time to ensure a long-time organisational run.
c. Specific Internal Controls
The following internal control measures can be implemented by the organisation to
mitigate the threats posed by the above-identified ICW.
 Proper documentation: The first and foremost measure that the organisation direly
needs to adopt is proper documentation. To achieve the discussed measure, the
organisation should take assistance of the ICT (Information Communication &
Technology) (Sadiq & Governatori, 2015). The organisation should adopt and
more importantly enforce non-verbal communication by forcing the internal
stakeholders to make their conversation over non-verbal media such as the
emailing services, instant chats and similar tools. A monthly, audit of the
communication among the internal stakeholders should also be done to ensure that

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they are using the tools for productive means and are not using it to fulfil personal
agenda or interests.
 Structuring the Purchase process: Another notable measure that the organisation
can adopt to mitigate the ICW risk is restructuring the purchase process and
instead of letting the purchase process run around all the departments, the
organisation can strictly allocate the job to particular staffs or teams (Ballesteros,
pan, batten & Li, 2015). Another measure that the organisation can adopt is that it
can provide full authority for a purchase process to a specific team consisting of a
manager, an accounting clerk, a buyer, a professional (of the subject that the
organisation is buying) and other necessary staffs. It would ensure that the
purchase process is simple and the data will be collective which the senior
officials should audit post completion of the purchase process to identify the
validity and ethnicity of the whole purchase procedure.
 Adopting e-procurement: The organisation can also move towards adoption of e-
procurement. In the deemed process the purchasing process between organisations
are done electronically (Wicaksono, Urumsah & Asmui, 2017). Adopting the
deemed method will enable the organisation to automate the process and in the
process reduce the complexity along with maintaining the documentation. As the
process are performed electronically, so the documents are safe-kept automatically
and it also reduces the effort involved by the human resources which further
reduces the chance of frauds. However, it should be kept in mind that the
organisation should hire adequate skill to manage the deemed process because
wrong inputs can increase the complexity associated with the purchase process.
 Monitoring team: The organisation should also formulate a monitoring team that
will monitor the organisational procedures that demands attention of external

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presence like purchasing processes (DeFond & Lennox, 2017). It will enable the
organisation to prevent any potential frauds in the purchasing process and will
also enable the former in maintaining the quality standard of the purchasing
procedure and the purchased item. However, it should be ensured that the
monitoring team is unbiased in their working pattern and also documents their
findings adequately. In other words, an auditing of the monitoring team should be
conducted on a regular basis to ensure their vitality and verify the reliability of the
reports submitted by them (Abbott, Daugherty, Parker & Peters, 2016). Another
notable fact that the organisation should keep in mind that the monitoring team
should be skilled in IT terminologies as the above recommended measures would
require a monitoring team capable of understanding IT and factors associated with
it.
Other minor measures such as awareness sessions relevant to the organisation operations,
policies & procedures and the results that can be associated with not following the
organisational guidelines can be adopted to ensure stakeholders ethical response to a process
and will even ensure that the processes will offer sustainable results for the organisation.
Platinum can also adopt measures other measures depending on the outcome they wish from
the organisational operations.
d. Flexibility of the recommended measures
The proposed measures have taken consideration of human factors and strategies which
can be easily modified with the system. The humans can learn to work with different tools
and techniques, after taking training of the proposed tools and hence the measures do offer
flexibility with changing IT structure of the organisation (Mnih et al., 2015). Additionally,
the e-procurement is electronic process of doing things and can be integrated with the
organisational changing IT infrastructure (Svidronova & Mikus, 2015). Finally, the paper has

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taken consideration of ICT in another proposed measure which can easily be integrated with
new It techniques and hence, it can be stated that the recommended measures offers
flexibility with the changing IT infrastructure of the organisation.

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Sadiq, S., & Governatori, G. (2015). Managing regulatory compliance in business processes.
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Svidronova, M. M., & Mikus, T. (2015). E-procurement as the ICT innovation in the public
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Weske, M. (2012). Business process management architectures. In Business Process
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