The Internal Control Weaknesses Samples †MyAssignmenthelp.com

Question: Discuss about the Audit and Internal Control Weaknesses. Answer: Introduction The internal control weaknesses are significant for the business organization as these play vital roles in impeding the efficiency of the business organization. Hence, it is essential for the business organization to recognize the internal control weaknesses so that can minimize the effect of the weaknesses as well as the organization can try to deploy effective measures that support in mitigating the weakness plus the effect of the weaknesses[1]. Timely detection of the weakness helps in designing the remedies for the weakness. The internal control system is considered as the safeguard to the business organization. The internal audit is mainly an informal review of the business organization by its owners or accountants. The internal control shows the particular policies of the business organization and the owner of the business as well as the managers and employees should follow these in the business. The internal control system has few weaknesses, and the business organization must address these internal control weaknesses. Five Internal control weaknesses Everyday supplies are depicted to be showing the single wholesale retailer of the variety of the garden tools and the garden supplies with including the electrical fixtures. The five internal control weaknesses that are defined in this case is being described in the following points, and also it is showing the remedies by the help of the which it can be easily mitigated. The following are provided below: - The weakness of Credit Management: The weakness of the credit management is being identified in this case which is being explained. The management of the company Everyday Supplies Pty Ltd is shown to be allowing the account-based transfers who are depicted to be beyond the ethics of the company[2]. The managers are seemed to be providing this facility to the familiarities and also this is being identified as the most important issue as it is being illustrated in this case. The other customers are provided with the supplies by the cash or the credit payments. This is being identified as an issue which must be mitigated by the manager for the enhancement of the company. The remedy which can be provided to this case as it is being illustrated shows the inappropriate management of the customers which is being made by the manager of the Everyday Supplies Pty Ltd. The company must mitigate this issue by the help of making some changes in the system of the supplies and also the enhancement of the customer can be easily depicted for the company[3]. The weakness of Account receivable supervision: This issue is being identified by the help of the preparation of the monthly records which are computer generated account receivables. It is being made without reconciliation and also the issue is representing the inappropriate calculation of the monthly overdue that are made in the accounts[4]. The management is indicated to be responsible for this issue, and also the explanation of the work is not appropriately conducted by the supervisor while conducting this assessment. As a part of the remedy, the conduct is being made by showing the inappropriate maintenance of the work, and also the conduct must be easily overcome by showing the illustrations of the process in an appropriate way. The management must be made by creating awareness in the management team as the case is being illustrated for Everyday Supplies Pty Ltd. The weakness of Cash Handling: The recognition of the process of risk generation is important for prescribing effective remedies for the business that help in minimizing the risk. The management should try to detect the internal control risk and the remedies in order to improve the business efficacy as well as to improve the auditing performances that enhance the trust and reputation of the business organization[5]. The cash handling is one of the important tasks of the business organizations that inherent adequate level of business risk. The cashier is responsible for the cash handling on behalf of the business organization. He uses to tally the cheques with the accountants, check the cheques and arranging them. Then he deposits the cheques in the banks. The procedures have a massive inherent risk as slight mistakes of the process can invite major loss to the business organization. The weakness of Bookkeeping: This issue is illustrating the underlying transactions are being made by the wrong judgment of the records. The enhancement of this inappropriate transaction is depicted to be indicating the whole work in an inappropriate way and also the establishment of the accurate information is depicted to be essential for the enhancement of the study[6]. The implementation of the tracking information systems, with removing the duplicity of the financial statements are also illustrated as the part of this process. This is simply showing the accurate measurements which are being undertaken for this transaction issues, and also the inappropriate management must be removed by implementing this step as a remedy. The tax calculation faults are also identified as an issue in this case which is seen due to the delaying of the process and also the management is being made by showing the illustration of the study. Thus this risk management can be easily made by the Everyday S upplies Pty Ltd which will enable the company to have an appropriate statement is being made by showing the write off accounts and also this remedy must be initiated for the betterment of the company. Thus the management of this issue is appropriately made for the development of the study was undertaken in this case of Everyday Supplies Pty Ltd[7]. Weakness of Write-offs: When an organization provides products or services on credit to the customers, then some customers may not be able to pay the due amounts. The write of the method is used to post in the account of the uncollectible receivable. The company writes off the account only when the customers are not able to pay the due amounts. When the accountant writes off the uncollectible, then it charges the amounts as the bad debt expense on the profit or loss statement[8]. The expenses can occur in a period after the record of the initial sale that violates the matching principle. Account receivable is the current asset that represents the amount of money due from the customers. The write-off method record the account receivable amount at the time of the sale. Thus, if the amount becomes uncollectible than the balance of account receivable will become high. The balance sheet value will be affected. The bad debt expenses are sometime presented in the later period that may lead to the inappropriate representation of the profits in the income statement. The profit margin can increase or decrease with the presentation of the bad expense. The write-off method provided a room to manipulate the values of the items in the financial statements[9]. Assertions: Existence: The accounts in the balance sheet should be equity, liabilities, and assets. Rights and obligations: The corporation has the rights over their owned assets and also liable to pay the liabilities. Completeness: The company has to report assets, liabilities and equity balances in an appropriate manner and it should be disclosed fully in the balance sheet[10]. Valuation and allocation: The items in the liabilities, equity, and assets account should be estimated and presented at their proper valuations in the balance sheet. Test of control for cash receipts: Occurrence: The company should employ two cashiers while checking the balances, reading the email, remittance advice, listing the cheque and depositing the cheques. Completeness: The accountant should prepare journals for all the transactions and then posting it on the ledger account. All the cash amount deposited in the bank should be recorded in an appropriate manner[11]. Accuracy: The balances of the accounts should be listed for all the transactions and generated cash flows from the transactions. Cut-off: The accountant should track all the deposits in order to ensure that the amounts are recorded during the accounting period. Classification: The classification of the transaction should be based on the requirement of the financial statements[12]. Conclusion The owner and management of the business organizations must detect the internal control weaknesses organization as these can impede the performance of the business organization. Apart from this, because of the internal control weakness the performances of auditing functions can also be reduced. Due to the weaknesses in internal control system, the undertaken business organization named Everyday Supplies Pty Ltd has faced severe issue that slow down the growth prospects of the organization. Apart from this, it makes the auditing tasks problematic, and several auditing issues take places due to the internal control weaknesses of the firm. 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