Identify the missing internal control characteristic
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1. Identify the missing internal control characteristic in each situation.
2. Identify each firm's possible problem.
3. Propose a solution to the problem.
Situation a. In evaluating the internal control over inventory for the Williams Oil Services Company, an auditor learns that the warehouse receiving clerk is responsible for ordering parts for supply inventory use in drilling services, counts the inventory when received at the dock, records the receipts into the inventory ledger, and takes the annual inventory, No supervisor reviews the receiving clerk's work.
Situation b. Nicole Lopez handles employee travel and expense reports for Scott Sales Services. With the growth in the economy, the sales team began traveling extensively gaining new business. Because of the heavy volume, she no longer required the sales team to provide original airline, hotel, or car rental receipts. She told them to just keep their meals under the $100 per day per diem and no receipts were required. She allowed them to use their own credit cards so they could get the frequent flyer points. She required them to turn in a summary of the travel expenses quarterly.
Situation c. Michael Jordon is a new employee hired from Craig's List recommended by a co-worker. Mike was hired as a Human Resource Assistant. Mike's first day on the job he is told that he should follow his own judgments when deciding how employee issues such as hiring and firing of employees, sexual harassment, and ethical infractions should be handled.
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Solution Summary
Discussion is about a paragraph for each discussion the control that is missing and why it is needed. The potential problem and a solution is suggested.
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Situation a. In evaluating the internal control over inventory for the Williams Oil Services Company, an auditor learns that the warehouse receiving clerk is responsible for ordering parts for supply inventory use in drilling services, counts the inventory when received at the dock, records the receipts into the inventory ledger, and takes the annual inventory, No supervisor reviews the receiving clerk's work.
1. Missing control characteristic.
Segregation of duties. The person with access to assets (inventory) should not also have the ability to enter into the general ledger or count the receipts. That way they cannot increase or decrease the records of shipments or ledger amounts to cover for missing assets. The lack of supervision also increases the chance that a transaction would not be authorized but is of lesser concern than segregation of duties.
2. Possible problem.
The company may be too small or this may be a remote location with few workers and so one person is doing many duties.
3. Solution.
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