Purchase Control
Deficiency Recommendation Test of Control
Access to master file data is Access should be restricted to Inspect the that the only a
available to all. responsible official who should responsible official have access
Access to master file data reviewed the master file data to master file data and checked
chances of fraud purchasing on regular basis and should sign the master file authorized by
department will made on it . that responsible person .
fictitious supplier and made
fraudulent orders with out any
detection .
A payable ledger clerk use only Payable ledger clerk should Inspect the control sheet to
document count control when input invoices on timely basis confirm that count control
inputting invoices in the ledger. and the transaction are applied by the clerk in order to
It may be that all the invoices recorded with accuracy and ensure completeness and
are not entered in the ledger completely in the ledger and accuracy of payable ledger.
which leads to late payments to payable ledger clerk should sign
supplier( loss of supplier on it .
goodwill ) under stated the
payable.
Raw material will be Minimize the movement of the Observe the movement of the
transferred inventory during the count and inventory minimize during the
From warehouse to to factory should designated a separate count and designated the
during the inventory count area for the raw material separate area for the
production continue received production can continue . production of raw material
goods from supplier and
dispatch to costumer during
this period continue .
Confusion during the count of
the inventory leading to
incorrect the inventory
counting
The finance director authorize Supplier payments invoices Inspect the supplier invoices to
the monthly supplier payments should be regularly checked by ensure that the finance director
listing but only view the total the finance directors in order to reviewed these payments
amount of payments to be identified the error and fraud invoices regularly and also
made . and also sing on it. authorize by finance director .
The chances of that fraud and
errors are not identified on
timely basis .
GRN only sent to the finance Audit department have to Discuss with internal audit
department . access to the good received department that they have
There is no follow up on notes so that proper follow up access on the good received
incomplete order leads on incomplete orders . notes or not.
increased errors and fraud.
On the receipt of goods from Quantity and quality of goods Inspect the good received note
supplier the quantity received checked by the store assistant to ensure that the store
received from supplier are in respect to purchase order not assistant checked the quality
checked with the supplier against the supplier delivery quantity against the GRN and
delivery notes . notes and also sign on the good also have sing on GRN by the
goods are checked against the received note store assistant .
purchased order not the the
supplier delivery. Un necessary
purchases of goods leading to
wastage of resources.
Due to the shortage of staff Immediately heir temporary or Inspect to ensure that supplier
finance department so supplier permanent staff for finance accounts are reviewed by a
statement reconciliation not department Suppliers accounts senior person on regular basis
performed . are reviewed by a senior and also sing on it
Supplier accounts are not responsible person on regular
identified the promptly errors basis so that chances of under
due to under or over payments over payment can be minimized
to the suppliers and senior person should sign
on it.
Sales cycle
Deficiency Recommendation Test of Control
Credits limits are unchanged The credit limits are reviewed Inspect the credit limits to
unless the costumer requests by a senior official(finance ensure that a senior official
.The credit limits not reviewed director ) on on monthly or reviewed it and sing it .
regularly resulting too high quarterly basis and sing on the
credit limit will leads to bad report as an evidence .
debt or too low credit limits
decrease the sales .
Staff have discretion to grant Implement a mandatory Select a sample of the sales
sales discount discount granted supervisor review to control all transaction to with discount
are not reviewed . sales discount and set a granted and inspect for
This could result in threshold limit above threshold evidence that discount is
unauthorized discount leads to limit discount are authorized by approved by the sales director
loss of revenue as sales team the sales director or senior and also given to the valid
award unrealistic discounts to responsible person . costumers .
complete sales targets.
Company credit controller on Immediately heir a finance Inspect the newly approved
leave and no one has taken controller to prevent fraud and credit limit should it authorized
over duties . un authorized credit limits by the finance controller or it
The chances to increase the finance controller should authorized by the senior official.
irrecoverable debt . authorize the limits and sing it
The finance director authorize Supplier payments invoices Inspect the invoices of the
the monthly supplier should be regularly reviewed supplier that to ensure that
payments listing but only view by the finance director and also these are reviewed by the
the total amount of the sign on it finance director on regular basis
payments to be made
The chances of the error and
fraud will not be identified on
timely basis under or over
payments made to the supplier
Payroll Cycle
Deficiencies Recommendations Test of controls
The wages and the deductions A proper check and reviewed Get a sample of the calculation
are automatically performed the calculations performed in in relation to pay the wages to
but no check or carried out to order to the payments are ensure that calculation for
confirm the calculations . carried out by the senior wages are correctly
The chances of fraud leading to responsible official. And should performed .
over or under payment to the sign on it .
employees .
Staff are paid overtime hours Overtime payment reports are Inspect the overtime hour
on a monthly basis but the reviewed by a senior report to ensure that reviewed
overtime worked reports are responsible official on monthly by the senior person on the
only review every quarter . basis and if there is any error monthly basis and have a sing
Chances that fraud and error match with the payroll data on it .
not identified on timely basis and also sign on it .
payment report reviewed on
quarterly basis leading to over
payments for hours not
worked .
All employees of the payroll Access limited to a senior Inspect that the access of the
department can amend the responsible official of the master file limited to the senior
employees standing data . master file data of the person and reviewed by the
Chances to unauthorized employee and also that person official on the regular basis .
changes in the master file data reviewed the standing data on
and create fake employees the master file any new
leading to over payment of the information added or amend in
wages increase the wages the file authorize by HR head .
expenses
Manager decide to pay the Approved bounces parameters Inspect the bounce payment to
bounces to be paid to should be established and ensure that payments are
delivery drivers each quarter . bounces should be determine authorized by the senior
Bounces paid to delivery drivers and authorize by the senior responsible official
on monthly basis payments may responsible person
be under over paid by the
manager .
The staff collect the pay packet All the driver before taking cash Observe the payment method
by the staff asked for write from the staff should provide a to ensure that proper
name in order to collect the form identity and verification identification take before
pay packet to the staff and after collecting payments of the wages to the
Payments of wages without the wage should sing it delivery drivers and sing from
prove or identity may be that them .
paid to the incorrect or fake
employees leading to over
either due to fraud resulting
loss of cash
Operational manager has Temporary or permanent staff Inspect that joiner form are
processed the newly recruited should filled the joiner form and fulfilled by new employee and
temporary employees without payroll department should not authorized by the HR as a
any joiner form . added the employee until filled employee to ensure and
Temporary employees are not the joiner form to prevent fake prevent from fake employees .
being settled in the payroll this employees .
will leads to late payments of
the wages and did not deduct
the statutory deductions from
the wages .( operational
manager may be forgotten and
it may be mistake in the email
later so chances of the fraud
and errors in payroll leading to
over or under payment to
employees )
NCA Cycle
Some department have already A senior official should compare Get a sample of the purchased
significantly exceeded their the purchased order with the order that to ensure that it is
annual capital expenditures annual budget and then approved by the senior
It could leads to excessive approved and sign on it . responsible official .
unnecessary purchases and
wastage of the resources
Internal audit department Board should developed a Inspect the internal audit
under take he physical policy in order to ensure the program to confirm that non
verification of the asset each comparison must be carried out current asset is reconcile with
year as in prior year internal frequently if the asset is missing the non current asset register .
audit will complete the during the verification it should (inspect the internal audit
comparison at one factory and be investigated and if it is not program to to reconcile the
one warehouse in the year to located then it should be written frequency of the asset to ensure
date of year end ten head office down (mam Basma ) that asset verified on timely .
and ware houses there fore on
this basis require 10 years to ( More staff should be
physically to verify all sites . allocated to the
Slow reconciliation of the asset
will take 10 years leading to
verification and
misappropriation of the asset internal audit program
which are not actually located in should be updated so
the warehouse .
that verification of the
asset on timely.
Bank cycle
Deficiency Control Test of control
The reconciliation items on BRS Any significant and insignificant Inspects the sign on the BRS to
only investigated if the sum of errors are reconcile with the ensure that it is reconcile by
the reconciliation item is BRS on regularly by a senior responsible person weather
significant . responsible person and any significant as well as
Chances of errors and fraud in error identifies resolve it insignificant error so that issue
the bank reconciliation is not immediate and sing on the resolve on timely basis .
identified on timely basis also BRS .
insignificant errors leads to the
material issue.
There is no requirement Employee should required to Get a sample of the petty cash
receipts for sundry purchases put back receipt in the petty transactions receipt are in the
paid out of petty cash . cash box exchange of any cash petty cash box in respect to cash
Sundry expenses can be made taken by employee and petty taken.
for non business operation cash should be updated timely
misappropriation of the cash also if required approval of the
senior person if a large amount
taken by the employees other
than usual.
Main current account is Main current account reconcile Inspect the reconciliation form
reconcile on monthly with with the other bank reconcile to ensure that reconciliation is
other three bank accounts on monthly basis by a senior carried out on monthly basis by
reconcile quarterly . responsible official and also sing senior responsible official .
It all the bank account are not on the BRS to ensure that
reconcile on the timely basis prevent fraud and error in the
chances of errors and fraud is main current account
not identified on timely basis .