Internal Control and Weaknesses in Lakeside Limited: A Detailed Report

This report provides an analysis of the internal control system of Lakeside Limited, focusing on the payroll and purchase systems. The introduction emphasizes the importance of a sound internal control system in managing business risks and ensuring efficient achievement of organizational goals. The report highlights weaknesses within Lakeside Limited, including cash-based payroll, reliance on clock cards, and manual purchase transaction recording. A letter of weakness is presented, addressing these issues and suggesting improvements such as implementing IT systems for financial transactions and continuous payroll audits. The conclusion reiterates the need for improvements in the purchase and payroll systems and underscores the benefits of a robust internal control system for risk management. References include relevant books and online resources.

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Table of Content
INTRODUCTION...........................................................................................................................3
Importance of sound internal control system...............................................................................3
Letter of weakness.......................................................................................................................3
CONCLUSION................................................................................................................................4
REFERENCES ...............................................................................................................................5

INTRODUCTION
Internal control system is considered to be integral for business where it is being
undertaken with the motive to ensure that risks associated with the enterprise can be managed
easily. This system comprises whole network of systems which is being developed with the
organization in order to provide assurance that all the main goals of the business can be
accomplished efficiently. It also undertakes plans and procedures in order to ensure that
company objectives are met and on the basis of same future plans are made. The present study is
based on Lakeside limited which highlights the internal system of business along with the payroll
system.
Importance of sound internal control system
For every type of business it is must to have sound internal control system where
presence of effective systems within Lakeside limited can reduce risk of asset loss and assist in
ensuring that plan information is complete along with accurate (The importance of internal
control., 2010). Further, this system is regarded to be most crucial in financial reporting.
Moreover, the range of crucial areas which are covered in this type of system involves
prevention of fraud, its detection and protection intangible along with tangible resources.
Lakeside limited can easily segregate duties in case if its system is quite effective and in turn
accomplishing organization goals become easy for the business. Further, it is well known fact
that in every type of business some risks are largely associated and in order to deal with them in
proper manner it is must to have strong internal control system (NARAYANASWAMY, 2014).
Letter of weakness
To,
The Director, Lakeside limited
Date: 26th Nov 2016
Subject: Weaknesses in purchase and payroll system
After analyzing the entire purchase and payroll system of the business many weaknesses
have been identified which is having adverse impact on the business. Factory staff are paid salary
in cash form and the wage system totally relies of clock card. So, sometime it is possible that
wages to people are not paid as per the actual work done by the employee. Another weakness is
that SAGE payroll system is employed within the workplace where other forms of systems are
also present which business can undertake for improvement purpose. Apart from this, in case of
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purchase system the entire transactions are carried out manually where no advanced system such
as IT is being employed for recording monetary transactions. Moreover, line manager of every
department places their own order which can also act as main weakness. So, some improvement
can be done in the existing process of purchasing and payroll system where IT system can be
used for recording financial transaction such as purchase etc. For payroll system continuous audit
can be carried out and development of transparent payroll policy can be advantageous for
business (4 tips to improve payroll effectiveness., 2014).
CONCLUSION
On the basis of entire study it has been witnessed that purchase and payroll system of
Lakeside limited is not appropriate and it requires improvement. Further, development of internal
control system can bring fruitful results for company such as different type of risks can be
tackled easily.
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REFERENCES
Books and journals
NARAYANASWAMY, R., 2014. FINANCIAL ACCOUNTING: A Managerial Perspective. 5th
ed. PHI Learning Pvt. Ltd.
Online
4 tips to improve payroll effectiveness., 2014. [Online]. Accessed through <
http://www.hrvoice.org/4-tips-to-improve-payroll-effectiveness/>. [Accessed on 26th Nov
2016].
The importance of internal control., 2010. [Online]. Accessed through <
http://deepsky.co/2010/04/the-importance-of-internal-control/>. [Accessed on 26th Nov
2016].
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