Report: Internal Control and Cost Benefit Analysis
This report has been written to investigate and make suitable recommendation for improvement to the company’s internal control and accounting systems and assign such improvements to a cost benefit analysis.
Fraud:
No precise legal definition of fraud exists, though many of the offences referred to as fraud are covered by the theft Acts 1968 and 1978 (Kaplan chapter 5)
Causes of fraud, common type of fraud:
Falsification or alteration of accounting records or other documents.
Misappropriation of assets or theft
Recording of transaction without substance
Misapplication of accounting policies
Theft
False accounting
(K2.2) (K1.4)
After overseeing the dairy events of the last six months in the company, it has been concluded that the company’s internal control system is weak and has loopholes. The first evidence validating this claim is mismanagement of the physical controls. The record keeping by employees in accounts department has been delayed and piled up especially the Accounts Receivable ledger maintenance owing to Greg Morris’ focus diverted towards recovering the accounts receivable rather than maintaining its record.
Currently the list of authorized access users has not been established, meaning that the entire accounts department can access the information. Also, the information insecurity can be seen by the fact that one of the shop keepers kept his computer logged on and his girlfriend, who knew the password as well, regularly used the computer to make reservations.(Slide share)
Recommendation
Inkwell Ltd. mainly faces the threat of fraud due to mismanagement in the internal controls of the organization, therefore, the best way to identify fraudulent activities would be the use of internal audit, which is a very common practice and is done so annually at the end of the year.
Suspicious transaction reporting would work since currently many transactions took place in the company which could
Fraud:
No precise legal definition of fraud exists, though many of the offences referred to as fraud are covered by the theft Acts 1968 and 1978 (Kaplan chapter 5)
Causes of fraud, common type of fraud:
Falsification or alteration of accounting records or other documents.
Misappropriation of assets or theft
Recording of transaction without substance
Misapplication of accounting policies
Theft
False accounting
(K2.2) (K1.4)
After overseeing the dairy events of the last six months in the company, it has been concluded that the company’s internal control system is weak and has loopholes. The first evidence validating this claim is mismanagement of the physical controls. The record keeping by employees in accounts department has been delayed and piled up especially the Accounts Receivable ledger maintenance owing to Greg Morris’ focus diverted towards recovering the accounts receivable rather than maintaining its record.
Currently the list of authorized access users has not been established, meaning that the entire accounts department can access the information. Also, the information insecurity can be seen by the fact that one of the shop keepers kept his computer logged on and his girlfriend, who knew the password as well, regularly used the computer to make reservations.(Slide share)
Recommendation
Inkwell Ltd. mainly faces the threat of fraud due to mismanagement in the internal controls of the organization, therefore, the best way to identify fraudulent activities would be the use of internal audit, which is a very common practice and is done so annually at the end of the year.
Suspicious transaction reporting would work since currently many transactions took place in the company which could