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Control Deficiency

The document outlines several control deficiencies in a company's financial processes, including the setting of credit limits by inexperienced clerks, non-sequential numbering of sales orders, lack of segregation of duties, and outdated standard costs for inventory. Recommendations include having senior members set credit limits, ensuring sequential numbering of sales orders, hiring additional finance staff, and regularly reviewing standard costs. Control tests are suggested to confirm compliance with these recommendations.

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10 views1 page

Control Deficiency

The document outlines several control deficiencies in a company's financial processes, including the setting of credit limits by inexperienced clerks, non-sequential numbering of sales orders, lack of segregation of duties, and outdated standard costs for inventory. Recommendations include having senior members set credit limits, ensuring sequential numbering of sales orders, hiring additional finance staff, and regularly reviewing standard costs. Control tests are suggested to confirm compliance with these recommendations.

Uploaded by

sarimabbas.work
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Control Deficiency Control Recommendation Test Of Control

The new customers’ credit Credit limits should not be set Ask for credit limit authorization
limits are set by sales-ledger by sales ledger clerk, but some form to confirm its signed by
clerks. Clerks are likely to be senior member of sale responsible senior.
inexperienced they may set high department should set credit
credit limit for customers limits and these credit limits
resulting in increased chances should be regularly reviewed by
of bad debts responsible senior
Sales orders are numbered All sales order must be Ask for sample of sale order to
according to employee own sequentially numbered a ensure that it
identification code rather than regular sequence check should s sequentially numbered.
sequentially numbered. This will be performed on regular basis
make it difficult to trace any with any missing sale order
missing sale order resulting in being reported
loss of revenue
The finance clerk is responsible Additional employees should be The Auditor should physically
for several tasks this lack hired by finance department visit and observe whether
segregation of duties as one and work should be split multiple people are performing
person is involving in multiple between them and lily shah to rather than Lily Shah
tasks and can lead to increased ensure segregation of duties performing all the work
chances of fraud individually
The company values inventory The basis for standard cost Ask the sample of standard cost
using standard cost which was should be reviewed regularly to and ensure they are reviewed
last updated 18 months ensure it reflects current cost to and updated regularly
If standard costs were reviewed ensure inventory valued
18 months ago there is risk that correctly.
costs are misstated / outdated,
resulting in over/under value in
financial statement

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