Essay: Internal Control Analysis Of Platinum Industry's Special Ordering System." (70 Characters)

Internal Control Analysis

Analysis of the Internal control of the company is very important as it provides an insight on how the management is functioning and whether they are doing their duties effectively or not. It is very important that companies should have strong internal controls in place if they want to succeed (Maynard, 2017). In the given case of Platinum Industry with regards to the special ordering system there are certain elements of internal control weakness that cannot be ignored like –

Most of the orders that are received by the company are through telephones and they are verbal orders. So, there is no basis on which the company can cross check the same in the future. So, to make sure that the internal controls of the company are strong enough, the management can go for such methods that provides better documentation for all the process in the system. This will help in providing for the audit trail in the future. Thus, instead of verbal order confirmation the company should have a more dignified and processed way to filter the orders, process them and deliver them to the clients. It will help in ascertaining that there is no falsification of the accounts (Dichev, 2017).

One of the other major weakness in the accounts of the company is that the books of the company are not properly maintained. There is no consistency in the procedures followed by the company to edit its accounts and present its financials. One thing that can be seen is that the books of the company are debited before the payment is done, so what if there is a default in the future, it will destroy the overall flow of financials of the company and render it false. So, to change it the company needs to maintain its accounts in a clear-cut way there are no advance entries.

Another important change that the company needs to do is with its payment system where half of the payments are authorized by cashier and the same are done through cheques, the company needs to incorporate a more secured mode of payment so that in future there are very less chances that the employees would be able to falsify the accounts and it would also lead to more transparency and clarity in the overall system for the company and its managements. Thus, more secured payment modes are needed.

Another weakness is that there is no proper segregation of duties between the employees of the company. So, one employee is getting a lot of power with which they can misuse the funds of the company and cause a lot of issues, hence the aim should be that proper segregation of duties and power between the employees are there and also effective supervision should be there so that in future the company does not have to suffer. In any case if it is seen that the employees are falsifying the accounts they should be penalized. So proper allocation of power is very important between the various departments of the company (Alsagoff, 2010).

1. Effect of Internal Control Weakness on the functioning of the company.

Weakness in the internal controls of the company can lead to a lot of issues like –

· There would be a lot of loss for the company if it is not able to manage its accounts in a proper way.

· There would be issues with regards to the flow of information from one department to another and that would cause disruption to the business.

· The company might suffer in the long run because there will not be a proper stability for the company given the fact that its sources of income are less.

· The company needs to ensure that effective internal controls are in place so that they can manage the company in the long run (Chron, 2017).

2. Conclusion and Recommendations

· Proper controls to be incorporated

It is important that the management should think about incorporating proper internal control system in the company. It is very important that timely audit of the system must be done by the company, also it is important that help from experts must be taken as and when required so that in future the company does not have to struggle owing to poor internal controls. The most important thing would be that the management of the company should keep the system upgraded and keep a check on it in all ways possible (Alexander, 2016).

3. IT Controls

Having efficient IT controls are very important for the long-term growth and development of the company. Development in information technology has led to wide scale development in this field and many companies are incorporating them in the system to ensure that the system is free from all kind of errors possible. IT helps in making the system fast and saves a lot of time. It would help in increasing the overall efficiency of the system and that would help in increasing the productivity of the system. If we see closely then we can see that there are many manual works that have now been automated and that has helped the companies in scaling their revenues a lot. There are ways in which the Platinum industries can incorporate their IT practices in their system-

Electronic Forms – In place of verbal forms the companies can go for electronic forms, this would help in keeping a trail on the total amount of order received by the company and thus would help the auditors too. These purchase forms should be matched with the supplies made by the company and then that can be tied to the payment made. So, we would have proper proof with us that we can follow for ascertaining that there is no loophole in the system and this would also help in saving money.

Electronic Fund Transfer – Another most appropriate method that the company can follow is that they can use other method payment apart from cash and cheques. This would help in keeping the company secured in money terms. Like here we see that all payments that are made less than $10,000 are authorized by the cashier and the payment is made through cheques, hence the aim should be to change this and follow electronic fund transfer in which proper trail would be available for the company and will help in auditing the accounts of the company (Ghofiqi, 2018).

Another important change that the company can make in its present system is that they can introduce IT experts that can help in designing the overall domain for the company and that would be beneficial for the company in a way that they make sure of software application for these special-order systems. All this would help the management of the company and would also help the customers in striking a relationship with the company and make it easy for them that they can order their products through applications and thus there will be low errors (Abdullah & Said, 2017).

The management can also make use of MIS that is known as the management Information System, which would help the management of the company to supervise all the activities of the company and give better results in the end. All these would help in making the entire system of special ordering system fast and error free.