Case Study 1
The cash control system at the firm is very poor. The personnel is not into the small details that would have a great impact on the materiality of financial statements. Reviewing the bank statements and transactions will help identify the cause of the unreconciled difference. Recalculation, confirmation, and analytical procedures will help audit the cash system and give an accurate report. The evidence will help determine the cause and the best solution. It is also important to review the competence of the personnel. The firm should have policies that govern bank reconciliation, that is, have managers in charge of the proper records of cash. Any discrepancies should be investigated and the person in charge should be accountable. Segregation of cash management is an important control measure for the company.
Case Study 2
Negligence is the root cause of the poor inventory management system of the company. The staffs are aware of the problems and no one takes the initiative to correct even the management. This culture makes it difficult to properly manage inventory and its records. The best control strategy is to review the entire production management system and take account of the issues prevailing in the department. Recalculation and confirmation from supporting documents will help perform the audit on the unrecorded liabilities and the quality of inventory reconciliation. Managers should be held accountable for all management of inventory and proper record keeping. Supervision is a key strategy that will allow managers to be aware of the problems in the department and take the relevant actions.
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Case Study 3
Proper substantive testing procedures will help determine any materiality in the financial statements, especially for revenue and expenses. I would investigate the increased volume sales and production enhancements to get evidence on the material effect they have on income and revenue. Material misstatements are likely to happen due to the poor internal control system of the company. Recalculating the values and confirmation of increased sales using sale contracts and other records will help handle the audit on the income and expense. It is likely that the company may have a very poor corporate governance system because of their choice in hedging. Rehiring laid-off staff has a great effect on the relationship and view of the company and may affect their integrity.
Case Study 4
The firm has a sound internal control system but the problematic area is the non-automation of the cash handling system between departments. The company should have a system where the mail receipts department scan and key in checks for the day before passing over the work. The mail receipts department should have the supervisory personnel to ensure that all numbers are correct before passing over to the bookkeeping department. This control measure will prevent the improper adjustments that the bookkeeping department has to do to reconcile the accounts. An online-integrated system will help departments get the information they need without the paper handling that can lead to mistakes or even loss of information. This system will make work easier and effective especially since there are three departments involved in cash and account receivable management.
Case Study 5
There is a discrepancy for deposits in transit totals (32,090 and 32,050).
The deposits to the bank take a long time hence a large number of deposits in transit. For instance, a check done on December 14 th was deposited on January 2 nd .
The amount of outstanding checks is also very high, especially for canceled checks.
There is no list of the outstanding checks.
Case Study 6
There is evidence of a poor control system, poor corporate governance, and financial accounting systems and procedures. Norma Lee, the CFO, lack the integrity when he is asked about a payment approval to a vendor. He turns bitter when Justin insists on getting the information. Norma is unorganized in his presentation and work as depicted in his dressing and knowledge in his work. Norma has to do most of the journal postings and payment approvals yet he lacks the knowledge of some checks and payment approvals. Segregation of duties would help create a sound system in the company. There is evidence of negligence on the part of the CFO – he has little information and answers to records he has made in the past. An employee’s check and a payment approval take so long to process and get to the right parties. There is a high risk of fraud due to the poor record and accounting system of the company. The CFO is likely to be involved in the fraud – he becomes so mad when asked about the approval of payments.
Do’s
Keep calm when there is a conflict to avoid unnecessary arguments.
Etiquette is important in the workplace despite having a close relationship outside of work
Maintain professionalism at work
Analyze the information given before taking it as true
Don’ts
Do not make things personal at work
Do not believe information without the proper evidence to support the information
Do not take things lightly when they are not especially on financial systems.
