Internal Control System Audit Report for Platinum Industries

This report provides an in-depth analysis of the internal control system of Platinum Industries, specifically focusing on their special ordering system. The report identifies critical weaknesses, such as the lack of proper documentation for oral orders, inadequate segregation of duties, and absence of a structured ordering process for customers. It highlights the negative impacts of these weaknesses, including potential financial losses and hindered growth. The report recommends several improvements, including implementing electronic forms and fund transfers, establishing a management information system (MIS), and developing an electronic data interface. These IT-related controls are suggested to enhance documentation, improve audit trails, and streamline operations. The report concludes with a call for regular internal control audits to ensure the company's financial health and operational efficiency.

Audit
2017

1
By student name
Professor
University
Date: April 30 , 2018.
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Executive Summary
In this assignment the company is facing some problems with respect to the internal controls of the
company with respect to the platinum industries special ordering system. Thorough analysis of the
system is done and proper recommendations are given so that in future the company can get that best
results which they want. It is extremely important that a company has strong rules that the company
can follow so that in the end the company is able to get the best results from its said operations. This is
analyzed in this assignment and proper explanation has been provided.
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Contents
Question 1…………………………………………………………………........................................................4
Question 2…………………………………………………………………………………………………………………….….4
Question 3…………………………………………………………………………………………………………………….….8
Refrences.....……………………………………………………………...........................................................11
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1. Platinum Industries are involved in making products for which they have arranged a special
ordering system in which the company has spent more than $13 million and the entire order is
divided into two categories within the range of $3000 and $30,000 and the payments have also
been categorized into two sections of more than 10,000 and less than 10,000. The overall
accounting treatment is different for both the sections and the company treats both separately.
As an auditor the job is to analyze the current system, state the issues involved therein that the
company needs to take care of and the overall internal control systems that the company can
change to get better results. The entire scenario is analyzed with respect to the new information
technology changes that the company can imbibe in its system to get better results.
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Special Purpose
Ordering
system
Purchasing Department
A purchase requisition form is filed
by the buyer and send to the supplier
The Receiving
department receives
the order, and stamps
it and asks the
authorities regarding
the same
The accounts payable team
ties the open orders of the
company with the orders
received for the company.
The treasurer and the cashier
signs the cheques and
authorises the payment in
lieu of the orders for the
company.

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3.
Analysis of the internal control system of the
company.
Internal controls are very important for the
overall functioning of any company and helps in
generating the best results. It is very important
that every organization is having strong internal
controls that are properly managed and properly
supervised. It is very important in case of
platinum industries also that when they are
launching their new system they must have their
internal controls in place so that the losses with
respect to the new system are low. On analyzing
the new system, the following conclusion can be
strong-
 The internal controls of the company are
weak and they are not properly
regulated. This can be attributed to few
facts like most of the orders that the
company deals with are oral orders and
there is no documentation for the same,
so this leaves no room for rectification in
the future and no proper audit is also
possible for the company, as audit trail is
missing (Webster, 2017).
 Another important point with respect to
internal control is that there is no proper
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segregation of duties among the
members of the company, given the fact
that the books of the company are both
updated and checked by the same
person. The cashier has the option of
both approving and executing the
payment. So, this gives them
unwarranted powers which they can use
against the company for their own
benefits. Thus, for longer term assistance
it is very much required that proper
segregation of duties and work is there
between the members of the company,
this helps in keeping a check on the
moral of the companies.
 Another important point with respect to
the company is that when it comes to
internal control and placing orders there
is no proper pathway that the customers
can follow. As in there is no structured
approach that the customers can follow
to place their orders. Just can be seen
that they need to call the purchase
department and there is no application
software that the companies can use in
general for such type of transactions
(Vieira, O’Dwyer, & Schneider, 2017).
 The books of accounts of the company is
not properly maintained and that is also a
very big weakness. Maintaining books is
very important so that the companies can
verify their financial statements
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accordingly. In this case we see that the
management is not following any proper
method of accounting and even before
the payment is made the company is
debiting the equipment accounts, that is
not a correct approach for the
management of the company to follow
and might to lead to falsification of the
accounts in the future. Thus, it is very
important that books of the company
must be properly maintained so that
proper opinion can be cast on it by the
members of the company.
2. Effect of weakness in internal control Weakness in the internal control can huge lose to
the management of the company. It might lead
to huge amount of losses that might disrupt the
overall operations of the company. It might also
affect the overall growth of the company (Abbott
& Kantor, 2017). It is very important that strong
internal controls must be in place so that the
company can function effectively. For the long
run also, it is not good to have poor controls in
place. It hampers the overall productivity of the
company and the special ordering system might
be a failure owing to poor resource management
and operations of the company. Ineffective
internal controls are very bad for the health of
the company in several ways and that is not good
for the company in any possible form.
3. Conclusion and Recommendations.
 Making the internal controls strong.
Effective audit of the internal controls of the
company must be done from time and time so
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that in case there are any risk elements involved,
the management of the company can get hold of
the same and take effective steps to eradicate
the same. For this the company should appoint
experts that have good knowledge with respect
to what works for the company and what does
not and thus that will help the company in
improving the business in the days to come.
IT related control practices can be installed with
respect to the present system of the company in
the following manner.
Electronic Forms – In place of oral forms the
company make use of electronic forms to place
order for the company. This will help in having
proper documentation of the orders placed for
the company and provide the auditors with the
audit trails that they can follow. The customers
would also find it easy to follow the company
with respect to filing of electronic forms.
Electronic Fund Transfers – In place of normal
fund transfer in form of cash or cheques the
companies can make use of electronic fund
transfers that can help the company in having a
secured gateway for the overall payment that the
customers that the company makes to the
customers. In this case we see that all payments
below $10,000 are authorized by the cashier who
makes the payment and regulates the same.
Thus, we see that this also provides a proper
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audit trail to the company that they can follow to
check whether all the orders have been paid and
in case there are any payables same can be
analyzed by the company (Alsagoff, 2010).
MIS – Mnagamenet information system can be
installed by the company to keep a track of the all
the activities that are done by the employees of
the company and all are properly communicated
to the managers of the company. We also see
that MIS is important as it helps in saving a lot of
time and efforts on part of the company (Chariri,
2017). It also helps in fast transfer of data and
that is important as data transfer forms the basis
of decision of any decision that is taken by the
managers of the company for the overall success
of the company.
Electronic Data Interface – It is very important
that there must be a proper data interface that
the company can develop that can be used for
online transfer by the company. Online
transactions helps in securing more business for
the company it helps in attracting more
customers for the company and helps in
improving the overall profitability. It is in trend to
have digital softwares that works better than any
normal outlets for the company (Kusolpalalert,
2018).
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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).
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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