Internal control

Firstly, identify those weaknesses from the scenario (i.e. those internal controls that are not performed correc

− John performs incompatible duties, since he

▪ is responsible for the maintenance of the fixed asset register;
▪ prepares a reconciliation between the fixed asset register and the general ledger accounts; and
▪ records all purchases and sales of fixed assets in the accounting records.

 Secondly, identify those internal controls that you know should be performed, but are not mentioned in the
− No one reviews and authorises the reconciliation between the fixed assets
register and the general ledger accounts.
− No one investigates the discrepancies or long outstanding items in the
reconciliation.

Weakness Risk / Consequence

There is poor segregation of duties since

Mr X performs all of the following Possible fraud or other irregularities could
functions (list the functions): go undetected,which could have a
negative financial impact on the entity.
There is poor segregation of duties since
Mr X performs all of the following Possible fraud or other irregularities could
functions (list the functions): go undetected,which could have a
negative financial impact on the entity.

No tests of creditworthiness are carriedout Sales could be made to clients who are
on clients before the order isprocessed. not creditworthy. This could have severe
financial implications for the entity.

The product catalogue is updated only

quarterly. The product catalogue that a clientis using
might be out of date, which could lead to
sales being made at incorrect prices. This
could lead to financial losses for the
company.

There is no independent review of thework

performed by Mr X.
As Mr X is not independently reviewed, he
could commit fraud and/or make errors,
which could go undetected. This could
have a negative financial impact on the
entity.
are not performed correctly):

are not mentioned in the given scenario (but which are still relevant to the scenario):

Recommendation