Control Deficiencies Control Recommendation Test of Control

This year's programme of visits, The board should establish a Review board minutes to
which has been planned and policy requiring physical confirm a new policy regarding
carried out on the same basis as verification of the non-current the internal audit visit is set up
previous years, means that by assets on a more frequent by the board.
30 September 20X5, IA will only basis, such as every two years.
have completed this Review records related to the
comparison at one factory and During internal audit visits, physical verification to ensure
one warehouse. any asset is still untraceable all assets have been compared
after a thorough investigation, and also obsolete assets have
There is a risk that any damage the asset should be written off been written off. Also, proper
occurred also existence of the in the records to ensure the authorisation has been
non-current asset cannot be non-current asset register obtained.
known. remains accurate.

Therefore, it results in the During Internal audit visits, any

misappropriation or inaccurate assets that cannot be located
reporting of obsolete or missing should be fully investigated to
assets. identify their location.

The finance director reviews the The finance director reviews the Review the payment list to
total amount of the bank whole payment list in confirm it is reviewed by the
payments list and authorises it. accordance of the supporting finance director.
documents such as Purchase
There is a risk that if only the order, Goods Received Note Enquire the account staffs
total amounts are authorised (GRN) and supplier invoice. about what all support
instead of reviewing each Reviewing the supplier names documents was obtained by the
payment, then any fictitious or enables to identify any finance director for undertaking
fraudulent transactions cannot duplicate or unfamiliar names this review.
be identified. exist.
The finance director should
Therefore, this results in the evidence the review by signing
incorrect payment to the on the bank transfer list.
suppliers or payment to
fictitious supplier.

Each week the The key card, which identifies Review a sample of data
hours worked are automatically employee numbers, is transferred from the key card to
transferred to the payroll transferred to the payroll the payroll system for evidence
system. As the process is system for calculating hours that it has been checked by the
automated, no checks over this worked, reducing input errors senior official in the payroll
transfer are performed. and this should be checked by a department.
senior official in the payroll
There is a risk that if the department and this check
automated transfer to the should be evidenced by the way
payroll is not reviewed then of signature.
errors or misstatement
occurred in the transaction
cannot be identified.

Therefore, this may result in

transfer of incorrect wages or
salaries to the workers and also
loss of employee’s goodwill.

If any changes to the payroll Any changes to payroll data, Review on sample of edit
data are required, the payroll must be reviewed by a senior reports which is reviewed by
clerk makes the amendment. payroll official. The edit report the senior payroll official and
An edit report of any should be reviewed on a weekly evidenced by way of signature.
amendments is produced basis by a senior official from
weekly by the system but is not the payroll department before
reviewed. the payroll is finalised and any
payments made. Any unusual
There is a risk that the payroll amendments should be
clerk may misuse the investigated. This review should
responsibility by transferring be evidenced (likely by way of
the more wage or salary to the signature) and the results of any
people he is close to. investigations should be
recorded.
Therefore, it results in the fraud
on the payment to the
employees and loss on the
employee’s goodwill might be
occurred.

During the year, the financial Any significant changes in the Review the board minutes to
controller changed the company’s asset policies should ensure that the change in asset
company’s capitalisation be discussed and approved by policies have been discussed
accounting policy. with the the board. and approved by the board.
revised policy, only items of a
capital (asset) nature exceeding All decision regarding changes Discuss with the finance
$20,000 are accounted for as in the asset policies should be controller about the
additions to non‐current assets formally recorded in the board capitalisation limit to confirm
in the statement of financial meeting minutes for whether the limit has been
position. Any non‐current accountability and traceability. reduced and agree it with the
assets purchased below financial statement to ensure
$20,000 are written off to the The capitalisation limit should that the assets are recognised
statement of profit or loss be reduced to an appropriate accurately.
(SOPL) as an expense. level so that the asset and profit
recorder are accurate.
There is a risk that if the limit is
too high then the capital (asset)
nature may also be expensed in
SOPL.

Therefore, it results in the

understatement of profits and
overstatement of expense.

The cashier reconciles the main Reconcile all bank accounts at Review the bank reconciliation
current account on a monthly the end of each month statement to confirm they have
basis as this contains the bee complete and reviewed
highest levels of activity and Review any discrepancies or monthly by the financial
reconciles the remaining three reconciling items between the controller.
bank accounts every three bank statement and the
months. company’s records.

There is risk that the fraud and Investigate the cause of these
errors happening in the bank discrepancies and correct the
account cannot be identified as entries, if necessary.
these are only reconciled once
in three months and cannot be The financial controller must
corrected on timely basis. review the bank reconciliations
on the monthly basis, even if
Therefore, it results in the there are no reconciling items.
increased risk of fraud

The staff member is required to

return any excess money to
the finance department but
there is currently no
requirement for receipts to be
provided.

There is a risk that the