Internal control Memo

User Generated

cncn1991

Business Finance

Description

Internal control memo

As a new employee at Canyon rental, an outdoor outfitters and supply shop, your boss has asked you to look at the internal control system within the store. He is seeking a loan for expansion and must have his books audited. The auditor asked about his control procedures and documentation. He has no idea what the auditor is talking about. Your boss has asked you to do what you need to understand the system and has asked for a memo with your observations and recommendations by the end of the week. Through interviews and observation, you notice the following:

  1. Purchase orders, and sales invoices are not pre-numbered due to the higher cost of printing the forms.
  2. To save time the sales clerk enters the sales at the end of the day into the accounting records, prepares the deposit and delivers it to the bank.
  3. The sales clerk a trusted and long-term employee grants sales returns at her discretion.
  4. The purchasing manager both orders merchandise and approves the payment for the order.
  5. Betty Gamble, the bookkeeper has not taken a vacation in three years.
  6. Checks are brought to the owner twice a week for signing. He is overwhelmed by all of the paperwork and has asked for the checks only on which he stamps his signature.

In your memo, give a summary of the elements of an effective internal control system. Comment on each of your observations and if there is a weakness provide a solution. Your memo should be 2-3 pages.

Criteria of writing paper

The demonstrates an understanding of internal control systems and a summary of the elements of an effective   internal control system is outlined.

Each observation is discussed in detail with weaknesses highlighted and recommendations for improvement listed.

Project as a whole accurately demonstrates   application of critical thinking skills.

The memo is well organized, in proper form, with a clearly evident purpose/thesis.


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Explanation & Answer

Attached.

INTERNAL CONTROL MEMO

1

TO: Mr. Willy Sanders, General Manager
FROM: Ms. Alison Fitzgerald, Assistant Manager
DATE: August 31st, 2016
SUBJECT: Internal Control Systems
After conducting my observation and doing interviews with several staff members, I
noted that there are several aspects that are failing the company and that must be rectified in
order to have a clear audit plan taking place. To start with, the company considers the cost of
printing to be very high and therefore all the purchase orders and sales invoices have their
numbers handwritten.
This can lead to errors since one might skip a particular number which will lead to errors
during the audit. In order to have an effective control system, the ord ers and invoices should be
printed so that the records are ...


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