Control deficiencies and recommendations

Question 1

no log is maintained for petty cash, employees just give receipt to manager. and at any time reciepts and cash should total 400 (petty cash float)
but according to IA, sometimes the float is below 400.

Answer 1

deficiency: no record of petty cash requests is being maintained,
petty cash float is not equal, this can be a result of
1) employees are not giving receipts
2) cash is being stolen or being spent on non business items.

recommendation:
a log should be maintained including date, amount, name of employee and reason for borrowing
when employee returns change and reciept, that shud be recorded in the log
on a weekly basis, manager should reconcile the petty cash and if receipt or cash is missing, inquire with employees.

Question 1

same password for all cash tills, and any employee can use any till.
these passwords are changed every two weeks

Answer 1

how it impacts business:
All employees having access to all tills increases risk of fraud and error.
in a case where there is cash disrepency in the tills, it will be difficult to identify who is responsible as there is no way of tracking who used which till.

recommendation:
each employee should have a unique login code. (think HBL tellers)
each employee should be allocated a specific till for their shift
Employees should be checked for criminal record and credit checks before hiring.
when disrepancies arise, they shud be double checked for error, then responsible employee should be identified and investigated

Question 1

the tills are closed by the manager, he counts the cash, the sum of the credit card vouchers, and reconciles them with the sales reading from each till. any discrepencies are noted in daily sales sheet (they include daily sales, cash, credit card vouchers and any disrepencies) he scans and emails these sheets to head office.

Answer 1

deficiency:
there is no segregation of duties, too much responsibility lies with one individual. there is a risk of fraud and error.
the manager could steal cash and record it as a discrepancy or just remove a sales sheet from the record.

recommendation:
this process should be undertaken by 2 ppl, ideally an assistant manager shud be hired.
one should count, other should record.

Question 2

the sheets are scanned and emailed to head office weekly

Answer 2

deficiency:
there is a possibility that some sheets are misplaced by the manager, resulting in incomplete data of sales and cash being recorded in the system.

recommendation:
sheets should be sequentially numbered so if any sheet is missing, manager can be inquired about it.
at head office, a sequence check shud be performed on a regular basis to identify gaps.

Question 3

cash is stored in a safe and the manager has the key , its in his desk when not being used.

Answer 3

defeciency:
there is a risk of cash being stolen if key is not secured

recommendation:
key safe should be replaced with digital safe, only authorised ppl shud have the code and it should be changed on a regular basis.

Question 4

management doesnt analyse difference between budgeted and actual wages, as no overtime is worked.

Answer 4

variance could be a result of other things, like extra employees hired, or increased rates.
so management needs to know if there is a major variance and why, becuz this is a significant expense.
if they are too high, this would affect profitability of company

rec:
variances shud be analysed
these shud be broken down to each relevant department as well.

Question 5

It is not possible for a store
to order goods from other
local stores for customers
who request them. Instead,
customers are told to contact
the other stores or use the
company website.

deficiency, recommendation, TOC?

Answer 5

Deficiency:
this could lead to a loss of sales as customers are less likely to contact another store or visit website

Control rec:
inter-branch transfer system should be established. inter branch inventory forms should be completed. this will result in maximisation of sales.

Test of control:
Pose as customer and ask
during interim audit, visit a number of stores, and ENQUIRE a manager if possible to order from other branches.
also INSPECT a sample of inter branch inventory forms to confirm if control is being operated

Question 6

oliver the purchase order clerk processes purchases below $1000 and is also responsible for processing invoices.
DEFICIENCY, REC, TOC?

Answer 6

def:
lack of segregation of duties, this could result in fraud or non business related purchases by oliver upto $1000 which is a signifcant amount

REC:
all purchase orders should be authorised by a responsible official.
an authorised signatories list should be made (who can approve)

TOC:
select a sample of purchase orders and INSPECT that they are signed,
agree the sign with the sign on the approved signatories list.

Question 7

good received note are completed by warehouse guys and sent to accounts department every two weeks
give 2 def, rec, TOC?

Answer 7

1) def: this can result in delay in payment of supplier, as purchase invoices could not be agreed to a GRN. also liabilities are understated.

REC:
send them on a more regular basis, like daily.
acc dept should do a sequence check to ensure no GRN is missing

TOC:
Inquire with accounts department how often they are sent GRNs to assess if they are being sent on time.
observe them doing a sequence check and discuss any missing items with accounts clerk

2) GRNs are only sent to the accounts department. they shud also be sent to the ordering deprtment, or it could result in orders being unfulfilled, resulting in loss of sales.

rec:
send a copy of GRNS to purchase order clerk and he should agree with order and mark the order as completed.
then on a regular basis he should review any unfulfilled orders and chase them with relevant supplier

TOC:
inspect the file of GRNs held by oliver and inspect that they are matched to orders and flagged as complete

review the file of unfulfilled orders and inquire their status from oliver

Question 8

supplier statement reconciliations are no longer performed
DEF REC TOC

Answer 8

DEF:
this could result in errors not being identified in a timely basis

rec: should be performed on a monthly basis and should be reviewed by a responsible official

TOC: review reconciliations to ensure they are being perfomed
inspect for evidence of review by responsible official
reperform recons to make sure they are being carried out appropriately

Question 9

IA has started to physically verify assets with non current asset register. To date only 15% of assets have had their existence confirmed because there is a staff shortage and several members of IA are new to the company.
def rec

Answer 9

def 1)
verification should be done regularly otherwise There is a possibility that non current assets have been misappropriated by staff, or misplaced.

rec: company should hire more people and train the new staff asap, and verify all the assets in the register.
after this on a monthly basis sample should be verified.

def2) there is a significant staff shortage and new ppl
Maintaining an IA department is an important control as it enables senior management to test whether controls are
operating effectively within the company. If the team has staff shortages or lack of experience, this reduces the effectiveness of
this monitoring control.

rec: consider hiring new ppl, in the meanwhile consider seconding other dept ppl like finance to help with audits, ensuring tho that audit is not being done of the controls of their own department.

Question 10

the production supervisors determine the amount to be paid as bonus to deserving employees, and they notify the payroll department

Answer 10

deficiency: supervisor should not be the one to determine the amount of bonus, as they could pay extra to friends and family members. this will result in increased payroll costs.

recommendation:
bonus should be determined by someone more responsible, like production director. and should be based upon a written policy.
if it is a big amount, it shud be agreed by board of directors.
it shud be communicated in writing to payroll department

Question 10

bank reconcilation is carried out every two months

Answer 10

for a cash based business, bank reconcilation is a key control, if not done regularly enough, fraud and errors may not be identified on a timely basis.

recommendation
perform monthly, and it should be reviewed by a senior (financial controller) and signed as evidence of review.

Question 10

student loan payments are made directly to govt, until employee informs HR that their loan is complete.

Answer 10

if employee is not monitoring, this could result in overpayment, ( which will then have to be reclaimed, leading to employee dissatisfaction.) or underpayment (meaning non compliance aka fines for both employer and employee)

rec:
payroll should maintain a schedule by employee of payments made to government and the balance owed.
on a yearly basis it should be reconciled with govt loan statement and agreed by employee.

Question 10

system automatically calculates gross and net pay, and these calculations are not checked.

Answer 10

if there is an error in the system, it would not be identified, this could result in under or overpayment resulting in employee morale taking a hit, or increased payroll costs

recommendation:
a senior shud recalculate the gross/ net pay of a sample of employees and compare with the system.
the calculations should be signed as approved before making payments.

Test of control: inspect a sample of gross net pay calculations for evidence that they are approved and signed

Question 11

for employees paid via bank transfer, senior payroll manager, on a monthly basis, agrees list of bank payments to payroll records and if any errors are noted, he amends the bank records

Answer 11

impact: there is a lack of segregation of duties.
this can cause fraud, he can increase amounts to be paid, process them and amend payroll records.

rec
he shudnt be able to change payroll records as well as authorise payments.
authorisation of bank transfer listing should be done by someone outisde of payroll department, like finance director.

Question 11

holiday request forms are required to be approved by managers, however this is not done usually.

Answer 11

this could result in employees all going on holiday at the same time, resulting in the power station being understaffed and therefore, a loss of production

could also result in overpayment of wages

rec:
inform employees they cant take holiday without approved form.

payroll clerks should not approve holiday payments without approved form.

Question 12

production supervisors distribute pay packets to employees as they know everyone by name

Answer 12

1) supervisor is not independent to give wages. they cud adjust them and give more to their favs while reducing others.
this could result in loss of morale

2) giving wages without proof of identity arises risk of payment being given to incorrect employees

recs:
payroll should directly give packets to workers, after looking at their clock card and photographic ID.

2) if suoervisors must give, they shud be signed by employees to confirm receipts and if absent, return to payroll immediately

Question 13

During the year, the human resources (HR)
department has been busy; therefore the
payroll department has set up new joiners
to the company.
def
rec

Answer 13

segregation of duties, payroll is resp for payment so risk of fraud and fictitious employees being set up

rec: give other tasks to payroll, but they shud stop setting up new people.
already setup employees shud be reviewed, by checking employee files to confirm these employees are bona fide.
another dept ppl’s could be used, or hire new people.

Question 14

New customers undergo a credit check, after which a credit limit is proposed by the
sales staff and approved by the sales director, these credit limits are not reviewed after this

Answer 14

def: after a period it may be discovered that credit limit is not appropriate, too high could lead to bad debts, too low could lead to loss of sales. this should be reviewed and changed.

rec:
sales director should regularl review credit limits based on order history and payment record.

Question 14

High value inventory is stored in a secure
location across all nine warehouses and
access is via a four digit code, which is
common to all sites.

Answer 14

def: lots of ppl will know the code, and could access inventory at any site, increasing risk of fraud

rec:
unique code for each site, only tell to few ppl, change on regular basis.

Question 14

The wage rate has been increased by the HR
director and notified to the payroll
supervisor by email

Answer 14

1) def: significant exp should be approved by board of directors.
rec: hr should propose but bod should approve, then formal notification written shud be sent to payroll supervisor.

2) payroll supervisor just increased without authorisation, could result in fraud.
rec: new rate shud not go live until approved by payroll director.

Question 14

Invoices are authorised by the finance
director, but payment is only made 75 days
after receipt of the invoice.

Answer 14

def: could result in missing discounts, supplier goodwill loss and they may not provide goods in future

rec: review this policy, consider if early payment shud be made to avail discounts, if not pay according to supplier’s payment terms.

Question 15

monthly inventory counts are supposed to performed but aren't.

Answer 15

deficinecy: in order to rely on inventory records for deciision making, all inventory should be counted, with high value inventory being counted twice. failure to do this will result in inventory records being incorrect recommendation: the program of monthly count should be reviewed for ommissions. lines that have been missed out should be included in the remaining counts at year end if some lines are identified to be omitted, company should organise an additional count to enure all inventory items are confirmed to inventory records.

Question 16

The IA department only undertakes cash control visits to the 20 largest stores as they feel this is where most issues arise. total stores are 45

Answer 16

this means more than half stores are not being visited, this increases risk of errors and fraud since there is no check. rec: IA should have a rolling program to visit all 45 stores. this program can have a bias to visit large and high risk stores, but all stores should be visited on cyclical basis.

Question 17

Where employees’ friends or family members purchase clothes in store, the employee is able to serve them at the till point.

Answer 17

def: they could give the goods away for free or undercharge for goods sold, giving unauthorised discounts. rec: make a policy where employee cant serve their friends fam. they shud req manager to serve them CCTV cameras should be placed to prevent and detect fraud carry out regular inventory counts to identify if any goods are given for free.

Question 18

The daily reading of sales and reconciliations to the tills is performed in aggregate rather than for each till.

Answer 18

def: This means if exceptions arise, it will be difficult to identify which till caused the difference and therefore which employees ar responsible,and may require further till training or have undertaken fraudulent transactions. rec:The reconciliations should be undertaken on an individual till by till basis rather than in aggregate.

Question 18

New customers’ creditworthiness is assessed by a salesperson who sets the credit limit, which is authorised by the sales director.

Answer 18

sales people have targets to meet so they may onboard new customers even if they aren't credit worthy. this could result to sales being made to risky customers. control: credit worthiness shud be checked by a third party (credit agency) and credit limit shud also be set by a credit controller.

Question 18

The cash of daily sales is kept at the store overnight in a small safe, collected in morning by secuirity company

Answer 18

this isnt secure as cash is significant amount, risk of theft rec: shud be collected daily at night by security company so it doesnt have to be stored overnight

Question 18

The sales person is given responsibility to chase customers directly for payment once an invoice is outstanding for 90 days. This is considerably in excess of the company’s credit terms of 30 days

Answer 18

this will lead to poor cash flow, payments shud be chased in 30 days not 90. plus, sales ppl are more likely to chase their sales target than do this work. this will lead to bad debts and reduced profit rec: hire a credit controller for this job, and make him do it after 30 days.

Question 18

Customer orders are given a number based on the sales person’s own identification (ID) number

Answer 18

these are not sequential numbers, it will be difficult to identify missing orders and monitor if all orders are being dispatched in a timely manner, leading to loss of customer goodwill. rec: sales orders should be sequentially numbered, on a regular basis sequence should be checked to identify any missing orders.

Question 18

If a store needs change, a junior sales clerk is sent to the bank by a till operator to change it into smaller denominations

Answer 18

def: risk of cash being stolen, or collusion between clerk and tiller. since no record is kept of how much money is taken out of till or returned. rec: company should make a cash float requirement policy and decide how many of which notes should be kept. manager shud comply with this policy in the morning. if further change is required, manager should authorise a member to get cash from the bank and record movements in and out of the till

Question 19

Sequentially numbered goods despatched notes (GDNs) are completed and filed by the warehouse department.

Answer 19

If the finance department does not receive a copy of these GDNs, they will not know when to raise the related sales invoices. This could result in goods being despatched but not being invoiced, leading to a loss of revenue. rec: 4 copies of GDN shud be made 1- customer 2- warehouse 3- finance dept 4- sales finance dept clerk after matching gdn with sales order form should raise invoice.

Question 19

The sales person emails the warehouse despatch team with the customer ID and the sales order details, rather than a copy of the sales order itself, and a pick list is generated from this.

Answer 19

there is a risk that sales person inputs the details of order incorrectly, resulting in goods being dispatched in wrong amount or to wrong person, resulting in loss of goodwill rec: a copy of sales order shud be forwarded to warehouse pick list shud be generated from the original order form. warehouse team shud confirm quantity, description and quality of orders before dispatching.

Question 19

Customer orders are recorded on a two‐part pre‐printed form, one copy is left with the customer and one with the sales person

Answer 19

def: sales department doesnt have any record, so they wont be able to monitor the sales to check if they are completed on a timely basis, this could lead in loss of revenue and customer goodwill rec: form should be 4 part, 1- customer 2- sales department 3- warehouse department 4- finance department order form at sales dept shud be matched with a goods dispatched note, a regular review shud be done to identify any unfulfilled orders.

Question 19

bank reconciliations are reviewed by senior if there are any un reconciled amounts.

Answer 19

def: The bank reconciliation could reconcile but still contain errors as there could be compensating errors which cancel each other out. also, for a cash based business, the bank reconciliation is a key control which reduces the risk of fraud. If it is not reviewed, then this reduces its effectiveness. rec: shud be reviewed even if no exceptions. review shud be evidenced by signature of controller on the bank recon.

Question 20

sales people are allowed to give upto 10% discount to meet their targets, they record the discount in the master data file

Answer 20

1) they may give unrealistic discounts to meet their target, and they may give unauthorised discounts cuz the discounts are not reviewed rec; discounts should be authorised in advance by a responsible official, such as sales director. if not practical, the supervisor shud do this. 2)they shudn't be able to make changes to master data file, this could result in fraud or error (meaning loss of sales revenue or over charging of customers) rec: changes to master file shud only be made by supervisor or above. an exception report of changes made should be made and checked by a responsible official.

Question 21

inventory count will be done by warehouse staff. DEF REC TOC?

Answer 21

There should be a segregation of roles between those who have day‐to‐day responsibility for inventory and those who are checking it. They may want to hide inefficiencies and any issues so that their department is not criticised. errors and fraud could be hidden causing loss for the company. rec: Alternative members of other departments (internal audit) should be doing the counting, who are not resp. For inventory, WH team should not be involved in count at all. TOC: inquire counting staff which department they work it

Question 22

inventory count mein counters are given sheets which contain product codes and the inventory quantity as per the records DEF REC TOC

Answer 22

Deficiency: the counters may simply agree without checking, which will result in significant errors in inventory control: sheets should not contain quantities toc: inspect a sample of sheets to ensure no quantites are written.

Question 23

10% of warehouse inventory includes third party's inventory. it is scattered all over the place. at stock count, counters are told to record 3rd party inventory on blank sheets, and adjustment will be made by finance department.

Answer 23

deficiency: there may be difficulty in identifying this inventory, so errors may take place. control: gather all third party inventory in one place, clearly mark and exclude the area from counting process. toc: inquire where third party inventory is stored observe inspect the sheets to make sure these bays are not included in counting process.

Question 24

some goods in inventroy count are high value, they are stored in a locked area, all the counting teams will have access to this area.

Answer 24

this increases risk of theft rec: senior members should be allocated to count these goods. upon completion of count, code should be changed toc: attempt to access the high value area, shud not be possible without code after count attempt to access area with old code.

Question 25

Employees swipe their cards at the beginning and end of the eight‐hour shift and this process is not supervised

Answer 25

Deficiency: employees may just swipe the cards and leave, resulting in payment for hours not actually worked Rec: hire security staff to supervise this process TOC: observe that security is supervising and any discrepancies are discussed with staff

Question 26

at the end of the count, financial controller will confirm with each team that they have returned their inventory sheets

Answer 26

def: it is important that the fc reviews the sequence of the sheets to ensure to sheets are missing, if not done, this could cause inventory records to be incorrect toc: inquire if fc reviewed inspect on sample basis that no sheets are missing

Question 26

areas that have been counted in stock count are not flagged, as no two teams are alloccated the same area.

Answer 26

there is the risk that some areas of the warehouse could be double counted or missed out resulting in errors in the inventory balance. rec: all areas should be flagged, and supervisor shud check that they are flagged as completed toc: confirm from teams that they are flagging at the end of count check if any aren't flagged.

Question 26

during inventory count each area is counted once only def rec toc

Answer 26

def: If inventory is only checked once, then counting errors may arise resulting in under or overstated inventory rec: count twice, second time by a different team, if too time consuming, second team should count on sample basis toc: observe counting teams to confirm whether second counts are being undertaken or not.

Question 27

Employees are entitled to a 30‐minute paid break and do not need to clock out to access the dining area.

Answer 27

def: Employees could be taking excessive breaks. This will result in a decrease in productivity and increased payroll costs. rec: Employees should be allocated fixed break times and there should be a supervisor present to ensure that employees only take the breaks they are entitled to toc: Observe the dining area during break times to ensure a supervisor is present.

Question 28

Although there is a human resources department, appointments of temporary staff are made by factory production supervisors.

Answer 28

The supervisor could appoint unsuitable employees and may not carry out all the required procedures for new joiners. could result in employees not receiving correct pay/ deductions made, resulting in dissatisfaction control:: only hr shud appoint all employees toc: inspect hr procedure manual to ensure all staff is onboarded by hr for a sample of employees, look at employee files to ensure all checks were carried out by hr before employment

Question 29

Overtime reports which detail the amount of overtime worked are sent out quarterly by the payroll department to production supervisors for review.

Answer 29

they are reviewd after payment is done, could result in unauthroised overtime and amounts being paid incorrectly rec: review shud be done b4 payment, and review should be evidenced in writing toc: inspect that overtime reports are authorised before being processed (check for sign)

Question 30

Annual wages increases are updated in the payroll system standing data by clerks.

Answer 30

clerks are not senior enough to make changes, they could make errors (leading to dissatisfied employees) or they could make unauthorised changes rec: a senior responsible official should enter the wage increase, and it should be checked by another official for errors toc: ask a clerk to try to make changes , it should reject review the log of data to check if clerk made the changes or a senior

Question 31

employees who worked overtime can choose to be paid in cash or take days off. those who want money, authorisation is only required by department head if overtime is access of 30%

Answer 31

def: overtime below 30% can also be a significant amount, and if it is not authorised, it could result in overpayments as employees could claim overtime for hours not worked, this will result in increased payroll costs for the company rec: all overtime should be authorized by dept heads, this should be evidenced by signature toc: inspect a sample of overtime sheets to see if signed by relevant dept head

Question 32

Department heads are meant to arrange for annual leave cover so that overtime sheets are authorised on a timely basis; however, this has not always happened.

Answer 32

def: If overtime sheets are authorised late, overtime payments will be delayed. This will cause employee dissatisfaction. rec: remind heads of procedure clerks should monitor that they are being approved on a timely basis and follow up on late sheets toc: discuss with payroll clerk the process of approval when heads are on leave

Question 33

The finance director reviews the total list of bank transfers with the total to be paid per the payroll records

Answer 33

employees could be omitted, or fictitious and total would still agree even though it is incorrect. fraud being done loss for company rec: finance director should compare with payroll records to ensure only real employees are being paid (bona fide) on a sample f.d shud sign the payments list as evidence that check has been completed. toc: inspect payment list for sign that fd has checked it

Question 34

when customers order on phone, clerk checks inventory after order then calls them if it isnt sufficient

Answer 34

could result in loss of reputation or clerk could forget to inform them leading to unfulfilled orders rec: inventory should be checked while on call or tell them you'll call later after checking

Question 34

when customers order on phone, clerk takes order on blank paper then fills the order form

Answer 34

could result in incorrect or insufficient details recorded by clerk and could result in incorrect orders being dispatched, resulting in loss of customer goodwill rec: forms shud be filled while on call double check details with customer

Question 35

When raising purchase orders, the clerks choose whichever supplier can despatch the goods the fastest.

Answer 35

def: goods of higher price or low quality may be ordered, as the only factor considered was speed of delivery. This will reduce the company’s profit. rec: make an approved suppliers list considering all factors, then orders should be placed from that list only

Question 36

purchase orders are not sequentially numbered

Answer 36

ordering team will be unable to monitor if orders are being fulfilled on a timely basis. resulting in stockouts will cause disruption in production and dissatisfied customers rec: shud be sequentially numbered, and review should be done on a regular basis, ideally weekly, to monitor order status

Question 37

orders are placed by a clerk, only orders above 5000 are authorised

Answer 37

clerk is not experienced enough, could result in error, leading to incorrect product or quanitites being ordered or wrong supplier chosen. toc: every order should be approved by a senior of the clerk, and signed, authoried signatories list should be made with varying levels of purchase order authorisation.

Question 38

Purchase invoices are input daily by the purchase ledger clerk and due to his experience, he does not utilize any application controls.

Answer 38

there is a risk of incorrect or missing invoices, leading to supplier goodwill loss rec: should input invoices in batches and apply application controls such as control totals to ensure completeness and accuracy.

Question 39

The purchase day book automatically updates with the purchase ledger but this ledger is manually posted to the general ledger by clerk

Answer 39

manually posting increases risk of errors occurring, could result in payables balance being misstated in FS. rec: update the process so the purchase ledger automatically updates general ledger it shud then be reconciled by a responsible official by doing purchase ledger control account recon.

Question 41

Ten Teams of two are counting inventory from L to R and R to L

Answer 41

No clear division of responsibilities they could be counting together rather than checking each other’s count and errors may not be identified Rec: teams shud be informed that both members r to count separately, one counts and the second checks

Question 42

For goods despatched by local couriers, customer signatures are not always obtained.

Answer 42

def: Customers may falsely claim that they have not received their goods. Pear would not be able to prove that they had in fact despatched the goods and may result in goods being despatched twice. This could cause loss for the company. rec: remind couriers that sign needs to be obtained and payment will not be made for missing signatures toc: select a sample and ask pears for proof by viewing customer signatures.

Question 43

There have been a number of situations where sales orders have not been fulfilled in a timely manner, due to order not sent to dispatch department

Answer 43

This can lead to a loss of customer goodwill and if it persists will damage the reputation of Pear as a reliable supplier. rec;Once goods are despatched they should be matched to sales orders and flagged as fulfilled. The system should automatically flag any outstanding sales orders past a predetermined period, such as five days. This report should be reviewed by a responsible official.

Question 44

Customer credit limits are set by receivables ledger clerks.

Answer 44

Receivables ledger clerks are not sufficiently senior, and so may set limits too high, or too low. could lead to a loss of sales or irrecoverable debts rec: shud be set by senior and regularly reviewed by a responsible official toc sample and ensure credit limits are set by a responsible official, enquire clerks who can set limits

Question 45

Sales discounts are set by Pear’s sales team.

Answer 45

In order to boost their sales, members of the sales team may set the discounts too high. This will lead to a loss of revenue and profit for the company. rec: set a limit for discounts review of discounts shud be done regularly by a responsible official and it shud be evidenced toc: inquire with sales team the process of discount setting review that discount report is reviewed and evidenced by resp official

Question 46

company has considerable levels of surplus plant and equipment.

Answer 46

Surplus unused plant increases storage costs and is at risk of theft. If the surplus plant is not disposed of the company could lose income and incur additional costs which will reduce profit. rec: senior factory workers shud regularky review and identify surplus toc: observe the review being done

Question 47

The purchasing manager decides on the inventory levels for each store without discussion with store or sales managers.

Answer 47

def: may not have knowledge of demand and local market, may order goods that wont sell, causing loss for company. if not in trend, reputation can also take a hit rec: hold a meeting with store managers, if not practical, understand local markets by doing research toc: enquire purchasing manager, confirm with sotre managers if meeting was held. if emails are available, inspect a sample of emails

Question 48

The store managers are responsible for re‐ordering goods through the purchasing manager

Answer 48

if they forget or too late, it could result in stockout rec: automatic reorder level shud be set in inventory management systems, as goods reach re order level, purchase manager shud get an automatic notifcation of request toc: use test data, enter an amount that will decrease inventory to re order level, observe or inspect if manager gets a notification

Question 49

stores. On receipt of goods the quantities received are checked by a sales assistant against the supplier’s delivery note, and then the assistant produces a goods received note (GRN)

Answer 49

Deliveries from suppliers are accepted without being checked for quality first. They are only checked to the supplier’s delivery note to agree quantities. may be difficult to get a refund and may loose supplier goodwill rec: goods shud be checked for quanity and quality before accepting

Question 51

A junior clerk from the accounts department opens the post and if any cheques or cash have been sent, she records the receipts in the cash received log and then places all the monies into the locked small cash box.

Answer 51

Def1) unsupervised, cash can be stolen causing loss Def2) cash box is not secure Rec1) another member of team shud assist, one person open mail other records Rec2) get a fire proof safe, which opens with a digital code, only access by senior personnel