Strings Pty Ltd: Evaluating Internal Control Weaknesses in Revenue

This report identifies internal control weaknesses within the revenue system of Strings Pty Ltd, focusing on the order-to-invoicing process. The identified weaknesses include inadequate documentation, a non-computerized system prone to human errors, lack of physical and logical security, deficient transaction authorization, an ineffective information system, and unclear roles and responsibilities leading to a lack of separation of duties. These weaknesses result in errors such as customers receiving wrong items, shipping delays due to inventory discrepancies, and a reliance on manual logbooks for tracking missing items. The report recommends implementing proper documentation through an automated system, establishing authorization techniques before product delivery, maintaining a robust information system, implementing physical and logical security measures, and clearly defining employee duties and responsibilities to improve efficiency and accuracy within the revenue cycle. The report concludes by highlighting that the recommendations, once implemented, can help eliminate the identified weaknesses and improve the internal control of the revenue system.

Running head: ACCOUNTING SYSTEM
Accounting System
[Name of the Student]
[Name of the University]
[Author note]

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Executive Summery
This report is mainly associated with identifying the various internal control weakness in the
revenue system of strings Pty Ltd. Besides the identification of the weakness the report also
discusses about the various effects of the weakness on the revenue system. Lastly the report
provides certain recommendations so as to eliminate the various effects due to the weakness of
eth internal control.

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Table of Contents
Answer to question 1:......................................................................................................................4
Weakness in Internal control:......................................................................................................4
Consequences due to the presence of the weakness....................................................................4
Recommendations:......................................................................................................................5
Conclusion:..................................................................................................................................5
References:......................................................................................................................................7

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Answer to question 1:
Weakness in Internal control:
The internal control weakness in the revenue system of String includes the following:
1. The inadequate documentations of underlying transactions acts as one of the major
weakness in the internal control.
2. The system not being computerized might give rise to various human errors which is
likely or might result in accurate calculations,
3. Lack of physical as well as logical security might result in the loss or damage of the
various assets and the resources.
4. The system is also lacking the control due to deficiency of authorization of the
transactions.
5. Existence of an ineffective information system.
6. The roles and responsibilities of different individuals are not clearly defines and the
separation of the duties is not present.
Consequences due to the presence of the weakness
The weakness in the internal control has resulted in a large number of errors. Due to proper
management system the customers are receiving the wrong items due to various type of errors.
The weakness has also resulted in the delay in the shipping as the systems which are supposed to
be in the warehouse are not available while delivering the product to the customers (Balsam,
Jiang & Lu, 2014). Besides this there also does not exists any type of physical count of the
inventory. The absence of the automatic system has resulted in the manual writing down of the

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information regarding the missing items in the log book. The workers are associated with writing
down the log book at the end of each week for the purpose of updating their inventory records.
Recommendations:
The recommendations regarding the weaknesses in the internal control have been listed
below:
1. Maintenance of a proper documentation would be providing evidences for the various
transactions. The transactions would be done in an automated way. By making use of an
automated system proper records about the stocks and the availability of the products
would be maintained in a proper way. The tracking of the proper information would be
greatly helping out the company as well as the customers (Cheng, Dhaliwal & Zhang,
2013).
2. There should remain a proper authorization technique for purchasing before delivering
the products. Besides this there is also a need of maintaining a proper information system
which would be increasing the efficiency of the organization. This system would be
working in a systematic way and this would help the organization in staying competitive
as well as efficient.
3. By implementation of the physical and logical security the results due to loss or damage
can be controlled.
4. The duties of the employees are to be distributed almost them in a proper way. There
should exists respective responsibilities for eth employees. They are to be assigned with a
specific job role and responsibility (Klamm, Kobelsky & Watson, 2012).

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Conclusion:
Once the weakness have been identified and discussion about the effects have been done
then certain recommendations have been provided in this report which can be used for the
purpose of eliminating the various types of weakness that exists in the internal control of the
revenue system.

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References:
Balsam, S., Jiang, W., & Lu, B. (2014). Equity incentives and internal control
weaknesses. Contemporary Accounting Research, 31(1), 178-201.
Cheng, M., Dhaliwal, D., & Zhang, Y. (2013). Does investment efficiency improve after the
disclosure of material weaknesses in internal control over financial reporting?. Journal of
Accounting and Economics, 56(1), 1-18.
Klamm, B. K., Kobelsky, K. W., & Watson, M. W. (2012). Determinants of the persistence of
internal control weaknesses. Accounting Horizons, 26(2), 307-333.