be added to payroll.

This ensures that only genuine employees are

being set up in the payroll as fictitious
employees are difficult to be added as employee
number is required.

Senior payroll manager reviews list of bank Obtain and match the list of bank payments to
payments and agrees this to payroll records. If payroll records to ensure all discrepancies has
any discrepancies are noted, the senior payroll been amended by senior payroll manager.
manager always makes the adjustment in the
payroll records. Inspect for signature of the payroll manger in the
payroll records as evidence of the review being
This ensures that errors in the payroll records done.
are identified on a timely basis, thus preventing
from employees being mispaid.

Control deficiency Control recommendation

Each training centre is given an annual capital Before acquiring non-current assets, the
expenditure budget but some departments have department managers should issue a purchase
already significantly exceeded their annual requisition to finance director. The finance
budgets. director should refer to the annual capital
expenditure budgets prior to authorising the
The departments are not strictly following the purchase. The authorisation should be
budgets set as the capital expenditure is not evidenced by signature.
authorised prior to being processed. This would
lead to increase cost towards the company.

By the year end internal audit department will Plan the visits earlier and ensure all centres are
only have visited the four largest centres and visited.
five of the other centres randomly selected.

For the other centres which are not visited, there

is higher risk of misstatements as the
non-current assets retained are not being
examined, leading to increased control risks.

All members of the payroll department can Only payroll supervisor and above should be
amend employees’ standing data in the payroll given password access to amend the payroll
system as they have access to password, which records. Payroll clerks should be restricted to
is changed by payroll director on quarterly basis. only able to view it.

There is risk that payroll clerks may The password should be changed by payroll
unintentionally amended payroll records in the director on a monthly basis and it should be
system, causing employees to be mispaid, or generated using random password generator.
not paid at all. This would cause employees
dissatisfaction or additional payroll cost incurred
to the company.

Credit limit is set by sales director when new Credit limit should continue to be set by sales
customers are set up in the receivables ledger director and it should be reviewed on a monthly
master file and it remain unchanged in the basis by finance director to ensure appropriate
system unless a review is requested by the credit limits are granted to the customers. The
customer. review should be evidenced by way of signature
by the finance director.
The credit limits set might be outdated. This
would cause high credit limits being granted for
 customers with long-outstanding receivables,
thus increasing risk of irrecoverable debts. This
would also cause low credit limits being granted
to good credit rating customers, thus leading
loss of sales.

Client services manager who is responsible for A finance controller should be hired to take up
managing customer relationship and maximising the role of chasing payments from customer
sales is also required to chase payment directly rather than the client services manager.
with customers.

As client services manager main focus is to

remain relationship with customer and increase
sales from them. They would not chase
payment effectively, thus increasing outstanding
debts at the year end.

SWIFT CO [28 min] (13 / 14)

Direct control Test of control

The company has a resources (HR) department Enquire of HR department who is responsible
which is responsible for setting up all new for processing the wages and salaries.
joiners and a payroll department which
processes wages and salaries. Observe payroll department processing the
wages and salaries.
There is segregation of duties as key roles of
setting up joiners and processing wages and
salaries is done by independent person, thus
reduces risk of fraud.

When new employee joins the company, HR Attempt to add a new employee in the payroll
completes joiners’ form which includes a unique system without an unique employee number.
employee number for each new employee. The The system should block or reject the new
unique employee number must be entered into employee from being added.
the payroll system before employee can be
added to payroll.

This ensures that only genuine employees are

set up in the payroll system as the use of unique
employee number makes it difficult to add
fictitious employees in the payroll system.

On a monthly basis, an exception report relating Obtain the exception reports and review for
to changes to the payroll standing data is signature of payroll manager which evidences a
produced and reviewed by payroll manager who review has been performed.
evidences this review.
Compare the date of review with the date of
This ensures that any fraud or error in the processing payroll to ensure review is done
payroll system can be identified on a timely before payroll is being processed.
basis.

The payroll supervisor selects a sample of For a sample of payslips recalculated by payroll
payslips, re-performs the gross to net pay supervisor, reperform the calculations to ensure
calculations and investigates any discrepancies. accuracy and review for signature of him to
The sampled payslips are then signed as ensure the controls are being performed.
evidence of this review.

This ensures that the automated calculations by

 the system are accurate, thus preventing errors
in the payment of payroll to employees which
would lead to employees dissatisfaction.

The purchasing manager authorises all Obtain sample of purchase orders printed and
purchase orders up to $5,000. Orders over review for evidence that authorisation is
$5,000 are authorised by purchasing director. performed by purchasing manager and director
based on the purchase amount.
This ensures that all purchases made are for
business purposes rather than personal use,
thus preventing additional costs to the company.

A payables ledger clerk enters the purchase Observe the payables ledger clerk performing
invoices in batches of 20 into the detailed the controls to ensure appropriate controls are
purchasing listing utilising control totals. in place.

Control totals utilised not only ensures

completeness of purchase invoices recorded,
but also ensure accuracy of the invoices.

Supplier statement reconciliations are Reperform the supplier statement reconciliations

performed on monthly basis. All differences are to ensure accuracy and review for signature of
fully investigated, and the financial controller financial controller in the supplier statement
reviews these reconciliations. reconciliations performed.

This ensures that the errors in the payables

balance are identified on a timely basis, which
prevents suppliers from being mispaid or not
paid at all.

AMBERJACK [38 min] (16 / 18)

Control objectives
●​ To ensure the goods dispatched are the correct amount and good quality.
●​ To ensure all sales are fulfilled on a timely basis.
●​ To ensure sales are being made to genuine and good credit rating customers.
●​ To ensure discount is only given to authorised customers.

Deficiencies Recommendations

Credit limits are set by receivables ledger clerks The credit limits set should be reviewed by
who record the new customer details and set finance director on a monthly basis. The review
credit limits in the master data file. should be evidenced by way of signature.

There is no review of the credit limits set,

leading to credit limits being outdated. This
would cause high credit limits is granted for poor
credit rating customers, thus increasing risk of
irrecoverable debts. Meanwhile, low credit limits
might be granted for good credit rating
customers, causing loss of sales.

GDN is assigned the same sequential number A different sequential numbering should be
as order number. apply to GDN and sales orders. Any gaps
identified should be taken appropriate actions.
This would cause difficulties in performing
sequence checks as using the same sequential
 number for different documents will lead to
confusion. Hence, the completeness of GDN
and sales order is at risk.

A copy of goods dispatch note (GDN) is not sent A copy of GDNs should be sent to the sales
to the sales department. department. Any unfulfilled orders should be
follow up on timely basis.
This would cause sales department unable to
monitor unfulfilled orders, leading to loss of
customer goodwill if sales are not fulfilled after a
period of time.

There are large number of sales invoices and The additional temporary staff members should
additional temporary staff members have been be provided with training before taking up the
appointed to help sales clerks to raise the sales role.
invoices.
For a sample of invoices issued, the sales
There is risk that the temporary staff members supervisor should review them to ensure
might not be familiar with company’s system accuracy and evidenced by way of signature.
and operations, leading to sales invoices
incorrectly issued to customers, which would
cause customer dissatisfaction.

Sales invoices are raised using quantities from The authorised sales prices list should be
GDNs and prices from authorised sales prices review and updated on a monthly basis by the
list, which is updated every 6 months. sales director and they should evidenced their
review by way of signature.
The period between updates of authorised sales
prices is too long and infrequent. This would
cause the sales prices to be outdated, leading
to lower revenue for company if sales prices is
too low or loss of revenue if sales prices is too
high.

Company offered 10% discount on all orders For the weekend which discount of 10% is
placed during one weekend in late November. granted, amend the standing data of sales
Discount is given by manually entered by sales prices to reflect the 10% discount granted so
clerks. that sales clerks are not required to manually
entered the discounts.
The sales clerks might wrongly enter the
discounts in error by incorrectly entering the After the weekend, the standing data of sales
discount offered. This would cause customer prices should be amended back to its initial
dissatisfaction if discount offered is too low or prices.
loss of revenue if it is too high.

Customer statements are no longer being Customer statements should be generated and
generated and sent out. sent out on monthly basis. Any long outstanding
debts should be followed up by obtaining
This would cause errors in the receivables not positive confirmation from customers.
identified on a timely basis, leading to customer
dissatisfaction or loss of revenue.

RASPBERRY CO [45 min] (9 / 10)

Direct control Test of control

Human resources (HR) department is Obtain job description of HR department and

responsible for setting up all new joiners. Forms payroll department to ensure these key roles are
 completed by HR is verified and a copy is sent responsible by different department.
to payroll department for employees to be set up
for payment. Discuss with HR department staff as to who is
responsible for setting up new employees and
There is segregation of duties for the key roles processing payroll.
of setting up new employees and processing
payroll. Hence, this prevents fictitious
employees are being added to payroll system
which would increase payroll cost of company.

Quarterly bonus is entered into the system by Obtain the bonus listings and review for
clerk and each entry is checked by a senior signature of senior clerk to ensure review of the
clerk for input errors prior to processing. The bonus input has been performed.
senior clerk signs the bonus listing as evidence
of undertaking this review. Obtain the approved signatory list and match to
the signature in the bonus listings to ensure it is
This ensures that bonus is correctly entered for performed by the approved responsible official.
each respective employees, thus preventing
bonus being mispaid to employees which would
lead to loss of employees goodwill.

Production employees are issued with clock Discuss with management to confirm that there
cards and are required to swipe their cards at is security staff supervising the process for 24
the beginning and end of their shift. This hours.
process is supervised by security staff 24 hours
a day. During odd hours, observe whether there is any
security staff on duty to supervise the process.
This ensures that employees cannot help
absent employees clock-in, thus preventing
payroll from being paid for work not done

On a quarterly basis exception reports relating Obtain the exception reports produced and
to changes to the payroll standing data are review for signature of payroll director to ensure
produced and reviewed by the payroll director. the controls are in place.

This ensures that errors or fraud in the payroll

standing data can be identified in a timely
manner, hence preventing additional costs to
company or employees dissatisfaction.

Two members of the payroll department Observe the process of producing pay packets
produce the pay packets, one is responsible for to confirm that they are two members are
preparing them and the other checks the performing the work with one preparing them
finished pay packets. Both staff are required to and the other checks them.
sign the weekly payroll listing on completion of
this task. Obtain the weekly payroll listing and review for
signatures of two members to ensure controls ar
This ensures that payroll being paid to in place.
employees is correct. If issues such as fraud or
error are identified, the company can follow up
with the respective staff who is responsible for
producing the pay packets.

(8.5 / 10)
Control deficiency Control recommendation

The payroll system automatically calculates The calculations processed by the payroll
gross and net pay along with relevant system should be checked by payroll clerks by
 deductions. These calculations are not checked. reperforming the calculations on monthly basis
before processing payroll. The calculations done
Failure to check calculations of payroll would should be reviewed by payroll supervisor with
lead to payroll being misstated and errors not evidence of signature.
being identified on a timely basis. This would
cause employee dissatisfaction or additional
cost incurred to the company.

Student loan deduction forms are completed by HR department staff should review the student
the relevant employee and payments are made loan deduction form monthly to identify the
directly to the government until the employee payment period and enquire with the respective
notifies HR that the loan has been repaid in full. employees whether the loan has been fully paid.

There is risk that the employees omitted to

notify HR that the loan has been repaid in full,
leading to company continuously paying to
government, which increases company’s costs.

Employees are required to complete holiday Relevant line managers should always
request forms if holiday leave is required and authorised the holiday request forms.
this should be authorised by relevant line Employees should be notified that they can only
managers, however this does not always occur. take holiday leave only if holiday request forms
are approved.
Failure to authorise holiday request forms would
cause employees to take unauthorised holiday
leave. In periods of high workload, there is risk
that insufficient manpower is available.

Pay packets are delivered to production When distributing pay packets to employees,
supervisors, who distribute them to employees employees are required to put a signature on
at the end of the employees’ shift. the employee listing printed as evidence that
they have received their respective pay packets.
There might be no proper controls conducted by
production supervisors when distributing the pay
packets. Hence, employees might claim that pay
packets are not paid to them but in fact they
already have received them, leading to
additional payroll cost incurred by company.

Monthly management accounts are produced Monthly management accounts produced

which detail variances between budgeted should be reviewed, including the wages and
amounts and actual. However, wages and salaries should be analysed by the payroll
salaries are not analysed. director on a monthly basis before processing of
payroll to ensure errors and fraud are identified.
There is risk that fraud or errors in the wages
and salaries are not identified on a timely basis,
leading to employees dissatisfaction or
additional cost to the company if employees are
being paid the incorrect amount of payroll.

HERAKLION [30 min] (10.5 / 14)

Control deficiency Control recommendation

Sales staff have monthly sales targets and are Sales supervisor should review the sales
able to use their discretion in granting sales discount granted to customers on a daily basis
discounts up to a maximum of 10%, which is to ensure they are appropriate.
recorded in the customer master data file.
There is no authorisation or review of the sales
discount granted by sales staff. There is risk that
sales staff grant maximum discounts to all
customers to ensure they meet the sales
targets. Hence, this would cause additional cost
to the company.

Once auto-emailed order is received, sales The sales person should send a copy of the
person prepares a separate email to the finance orders received to the finance department and
department and warehouse dispatch team with warehouse dispatch team rather than preparing
the customer ID and order details. a separate email.

There is risk that the customers’ details are

incorrectly written in the separate email. This
would lead to customers receiving the incorrect
amount or sent to the wrong customers, causing
loss of customer goodwill.

The completed GDNs are printed and filed in the A copy of GDNs should be sent to finance and
warehouse. sales department.

There is no copy of GDNs sent to finance and

sales department. There is risk that the finance
department staff do not issue an invoice for
sales completed, causing loss of revenue.
Meanwhile, sales department would not be able
to monitor unfulfilled orders, leading to loss of
customer goodwill.

Standard credit terms for customers are 30 days All outstanding receivables over 30 days should
and on monthly basis sales invoices which are be notified to relevant salesperson to chase
over 90 days outstanding are notified to the payment as a reminder to customers to clear
relevant salesperson to chase payment directly their debts as soon as possible.
with customers.

Only outstanding receivables over 90 days are

chased for payments would cause higher
chances of customers not paying their debts,
leading to higher irrecoverable debts and might
worsen company’s liquidity.

New customer leads are generated through The new customer leads should be reviewed by
third-party company. the sales director on a monthly basis to ensure
all customers added to the sales system is
As company has no control of third-party genuine.
company, there is risk that fictitious customers
are added to the sales systems. Hence, sales
could be made to them and cause additional
costs to company.

Sales staff are responsible for assessing new Customers’ creditworthiness should be
customers’ creditworthiness and proposing a assessed by credit controller of the company on
credit limit. a timely basis as they are more experienced
and qualified.
Sales staff are not superior and qualified
enough to be responsible for assessing For customers assessed, they should evidenced
customers’ creditworthiness. They is risk that it by way of signature.
they added low credit rating customers to the
sales system, causing higher risk of
 irrecoverable debts.

[12 min] (5.6 / 6)

Controls Mitigate risk

When there are new employees, the HR Fictitious employees cannot be added to the
department staff should complete a joiner form payroll records to be paid payroll as it will be
for each respective new employees and this detected during authorisation of HR supervisor.
should be authorised by the HR supervisor with
signature as evidence.

The authorised joiner form should be sent to

payroll department so that the payroll records
are updated.

The key roles of setting up new joiners in the This ensures that the employees will not collude
payroll system and processing of bank transfer to pay themselves additional payroll.
request should be done by two independent
individuals.

Prior processing payroll by payroll department, This ensures that no fictitious employees are
employee listings should be sent to each being added to the payroll system as the
department manager for review to agree the number of employees are being reconciled.
headcounts to the employee listings.

BAGGIO [30 min] (15 / 15)

Control deficiency Control recommendation Test of control

Credit limits remain at the Credit limits should be Review list of customers for
same level with no subsequent reviewed by sales director on a signature or notes by sales
changes being made unless monthly basis to ensure the director to ensure credit limits
customer requests an increase. credit limits are updated based are reviewed regularly.
on payment records of
There is risk that the credit customers. Once reviewed, the
limits are outdated. This would sales director should put a note
cause high credit limit is or signature as evidenced that
granted to low credit rating credit limits are reviewed.
customers, causing additional
costs to the company. Low
credit limit might also be
granted to high credit rating
customers, causing loss of
revenue.

Website is not integrated into The website should be Access the website and
inventory system and inventory integrated into the inventory attempt to make orders over
levels are not checked at the system with an interface the inventory levels. The
time orders are placed. showing the level of inventories system should prohibit the
in company’s warehouse. The order from being processed
There is risk that customers system should prohibit and the waiting time should be
are unaware that the inventory customers to make orders over shown.
levels are insufficient to fulfill the available inventory
their orders, which would need quantities and show the waiting
longer time for company to time required for the
fulfill those orders. This would inventories to be made