Protection Of Motherboards And More Pty Ltd

Internal controls weaknesses

Impact of the weaknesses

Possible solution

Lack of segregation of duties:

Use of the loading dock for both the outgoing shipment to customers as well as incoming deliveries.

It increases the risk of fraud, intentional manipulation, unexpected error leading to loss of goods, and delays in delivery of goods to customers.

Besides, it weakens other control procedures such as physical checks.

The firm should implement different docks for receiving incoming deliveries and issuing outgoing shipment. This will enable a system of checks and balances where the two departments will check against each other and reduce the risk of fraud

Placing of orders without the authenticating (supporting) documents

Without legally binding source documents it’s impossible to defend a transaction. This has led to customers denying ordering and receiving goods since there exist no source documents to authenticate the orders.

The firm should implement a system where there has to exist physical source documents such as orders, delivery notes, and bills of lading. Such documents are legally binding and make it impossible for customers to deny deliveries made.

Delivering goods without an invoice.

That is, generating an invoice after shipment.

Customers receiving the goods without the delivery note and invoices have led to them denying receiving the goods later which has led to most of the credit sales being written off as uncollectible

All deliveries should be accompanied by both the delivery note and an invoice. The invoice should be generated after the packing according to the packing slip and before delivery.

Upon receipt of the goods, the customer should sign both the delivery note and the invoice which immediately creates a legally binding liability.

Lack of physical controls; Failure to take stock counts for two years

Failure to take stock counts have led to the loss of goods witnessed in the firm due to possible fraud and theft by the employees, failed deliveries, and delivery of the incorrect amount.

The stock is a very sensitive item must be well guarded (Mary, 2017). The firm should institute a policy where physical stock counts happen on a monthly basis or after a fortnight after which stock, suppliers’, and shipping details should be reconciled to check against any loss of stock.

Making all sales on credit with no precise credit sale policy

Credit terms increase the risk of bad debts.

The firm should consider selling some of the items on a cash basis or instituting a policy where a certain percentage of the invoice amount is paid either on order or delivery.

Application controls

Validity checks

Configurable controls

Such controls are defined at the system generation point

Completeness and validity checks

They check data being entered for validity and completeness (Moore and David, 2017)

Authentication controls

These controls provide an application system authentication mechanism

Input controls

They serve to ensure that data integrity feeds into the system only from upstream sources.

Forensic controls

They ensure scientifically correct data

General controls

Backup and recovery procedures

To ensure the firm’s operation run continuously

Integrity checks

Checking that email and other data come from secure sources

Encryption

Coding of the firm’s data to ensure they are unreadable by other sources

Physical access controls

To prevent unauthorized access to both the hardware and software including emails

Virus and malware scanning

Scanning the computers for malware which might cause loss of data

Firewall security

To protect the firm’s internet and data  from external threats

In-depth white-listing and blacklisting

Blocks unknown and unwanted applications and installation of apps from unknown sources

Compliance with internal IT policies

Such policies may limit usage of application not supported by data loss prevention