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System Documentation, Risk Analysis, and Internal Controls

This document discusses risks and internal controls for an accounting system. It identifies risks such as cash theft, inaccurate record keeping, and fraudulent customers. It also analyzes internal control weaknesses like a lack of credit checks and segregation of duties. Finally, it evaluates physical and IT control deficiencies and lists the various documents and files used for stewardship in different departments.

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Carl Dhaniel Garcia Salen
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109 views4 pages

System Documentation, Risk Analysis, and Internal Controls

This document discusses risks and internal controls for an accounting system. It identifies risks such as cash theft, inaccurate record keeping, and fraudulent customers. It also analyzes internal control weaknesses like a lack of credit checks and segregation of duties. Finally, it evaluates physical and IT control deficiencies and lists the various documents and files used for stewardship in different departments.

Uploaded by

Carl Dhaniel Garcia Salen
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Salen, Carl Dhaniel G.

AIS

2A8

4. System Documentation, Risk Analysis, and Internal Controls

A. Flowchart

B. Risks

- Lack of supervision

- Cash misuse in the mailroom

- Inadequate capability of maintaining the accounts receivable record

- Cash theft in the accounts receivable department


C. Controls

- Separate general mails from customer checks and remittance advices

- Unless required, do not give customer checks and remittance advices to the accounts receivable
department

- Employ strict supervision of the 35 clerks who receive and sort the general mail.

5. Risks and Internal Controls

A. Uncontrolled Risks

- Sales to a fraudulent customer may occur

- Inaccurate recording of sales in the sales journal

- Possibility of delivering the wrong product to customers

- Inventory list misinterpretation

B. Internal Control Weaknesses

- There can be a risk of sales to fraudulent customers due to the sales clerk’s mistake in checking
customer credits

- Delivering the products before recording leads to inaccurate recording of sales

- Ineffective supervision of cash accounting may lead to cash theft

- Delivery of wrong products due to incorrect checking of shipment list by the warehouse and shipping
department

6. Internal Control Evaluation

A. Physical Control Weaknesses

- No credit checks made by the credit department

- The accounting clerk prepare vouchers and posts it into a single general ledger account

- The shipping clerk gets the merchandise and distributes them to people who haven’t placed their
orders
- Loss of sales invoice after the provision

B. IT Controls

- Segregation of duties

- Computerize the credit check process

- Pre-number all documents

- Reconcile accounts receivable control account with the accounts receivable subsidiary ledger

7. Stewardship

A. Customer Open Order File – Sales Department

B. Sales Journal – Billing Department

C. Journal Voucher File – Billing Department

D. Cash Receipts Journal – Cash Receipts Department

E. Inventory Subsidiary Ledger – Inventory Control Department


F. Accounts Receivable Subsidiary Ledger – Accounts Receivable Department

G. Sales History File – Sales Department

H. Shipping Report File – Shipping Department

I. Credit Memo File – Credit Department

J. Sales Order File – Sales Department

K. Closed Sales Order File – Sales Department

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