Internal Control Audit and Compliance System †MyAssignmenthelp.com

Question: Discuss about the Internal Control Audit and Compliance System. Answer: Introduction: Control practices in an organisation are the process which helps to maintain the efficiency and effectiveness in the reporting structure. The controls also help the management keep a check on each and every aspect of the organisation. Having strong internal control system helps eliminate the possibility of mistakes in accounting and also helps to keep a check on the resources of the organisation. The control system helps to identify the problem, solve the problem and make sure the problems do not recur in future. In our discussion below, we will discuss the controls required to be made on cash and cash transactions. (Trenerry, n.d.) As provide in the question, we see that Sarah runs a fruit stall in the local market and deals with cash transactions only. The cash box is accessible to all the staff members so that they can keep the sale proceeds safely. Sarah has now appointed a new staff member who works on weekends. She now thinks that the daily amount banked has decreased. She wants to know the control measures she can apply in her stall in relation to the cash. (Arwinge, 2013) In order to provide a proper control system for cash, Sarah first needs to understand the problems she has been facing. She needs to first analyse the situation and check if there exists a real problem or not. Therefore, we see that the daily amount which used to be reported before appointing new staff has relatively decreased, even when there have been no changes in sales. We can now say that there is a problem, and now we need to move towards next step which is problem solving. (Pfister, 2011) In order to solve the problem we are required to follow the following steps of internal control: Identification of the problem Analysing the problem Checking and formulation of various alternative solutions Evaluating these solutions Choose the best available option Moving towards the first step, identification of the problem, we can say that the problem has been identified. The real problem in the given case is that there are no control measures over cash. The cash is easily accessible to any employee, and there is no person responsible who can be held accountable for the misplacement of the same. (Graham, n.d.)We need to find measures to control these issues. We now need to further analyse the given problem, so that once a solution is found, measures to prevent the same problem to arise in the future can be taken. Cash transactions are hard to have control over and especially when the frequency of these transactions is very high. Cash is the easiest part of the organisation, which can easily be harmed. In order to prevent the mismanagement of the cash, steps are required to be taken so that accountability and responsibility can be tagged to somebody. (Graham, 2008) In order to prevent the mismanagement of cash, Sarah can provide individual cash boxes to each of her employees which can be accessible by only them. No other employee can access the cash box of other staff. Sarah can also conduct a thorough background check of the employees before hiring them. Sarah can also follow the buddy system while transferring cash. Different employees for different shifts can be made responsible. One particular person can be hired to manage the cash only, which shall be responsible to collect and pay the cash. Proper registers for cash sales are also required to be made. In order to double check the sales figures, the changes made in inventory can be compared with cash collected. She needs to conduct surprise checks for cash and check if proper entries for cash are being made or not. These were the list of options that can be adopted by Sarah. She now needs to check which options are feasible for application and can easily be executed. Sarah should go though each option separately, also she has to check the application of these. Of all the options available for Sarah to choose, she can easily implement the option of separate lockers, spate cashier, proper registers and surprise checks. Therefore, we see that there are a lot of solution that can be adopted by Sarah in order to minimise the risk of losing cash in her business. Also, if she thinks that cash flows have decreased after the joining of the new staff, she can keep a check on the staff herself. Diving of responsibility will help her understand the efficiency of employees too on an individual basis. This will also help her improve the operational efficiency and generate more revenues. References Arwinge, O. (2013).Internal control. Berlin: Springer. Graham, L. (2008).Internal controls. Hoboken, N.J.: John Wiley Sons. Graham, L. (n.d.).Internal control audit and compliance. Pfister, J. (2011).Managing organizational culture for effective internal control. Berlin: Physica-Verl. Trenerry, A. (n.d.).Principles of internal control. Sydney: University of New South Wales Press.