Auditing in a CIS Environment

Case Study

1. Key Internal Control Objectives of Candice’s Sta. Ana sales office

A. There should be segregation of duties that ensures that transactions are

authorized and has been approved by the appropriate individuals.

B. There should be a limitation as to physical access to both accounting

system and the warehouse.This will help in reducing the prospect of loss that is
difficult to traced to the accountable party.

C. To help identify any shortages that might be prevalent, there should be regular
verification of inventory.

D. Ensuring that there is appropriate monitoring of transactions before they

are processed in the system.

E. There should be established controls that ensure sales and purchase

transactions are properly record and recorded timely.

Key Internal Control Objectives

SEGRAGATION ESTABLISHED
OF DUTIES CONTROLS
Improve Internal
Structure

Align functions
organizationally
with common
best practices

LIMIT
Mitigate the risk
of intentional
fraud or
unintentional
error MONITOR
VERIFY
 2. The Internal control weakness of St. Ana store are the following:

 Separation of Duties- There is no separation of duties as for the distribution

and receiving of inventories.
 Security -The security in the warehouse and the vicinity is not strictly
guarded and locked which led to easy access to inventories. They should
install surveillance camera to alert them of unauthorized access.
 Unrestricted access to Inventories- All the employees have access to the
inventories. There should be limit in the access to avoid theft.
 Physical count- They do not exercise physical counting which is important
in determining the actual number of stocks.
 The records are not fixed in a daily manner or in a transaction form. They
can just alter important accounts because of the delayed recordings of
transactions.

3. Control Policies or Procedures to alleviate the control weaknesses

identified
 4. What other parties were at least partially responsible for the
inventory losses Candice suffered

Besides Coco Ta-uli, other parties were at least partially responsible for the
inventory losses Candice suffered include: (1) Jocris Mangari, the owner of
Mariton’s Tires, (2) Chewy Candice, chairman of the board and Chief Executive
Officer (CEO) of Candice Bothers, Inc., (3) Gummy Candice, Chief Operating
Officer (COO) of Candice Bothers, Inc., (4) The CFO of Candice Bothers, Inc., (5)
Casimiro “Cass” Sales, sales manager fo the Sta. Ana Sales Office, and (6) the
internal Auditor. The manager did not report and did not believe the excessive
shrinkage immediately so missed the chance to discover and correct it early. The
management was understaffed so the segregation of duties was not possible so it
is easy to penetrate. Internal audit did not count often enough or the problem
could have been found sooner. The friend, Jocris, could have refused to buy the
stolen tires as soon as he doubted where it came from.

5. Audit Plan

May 17,2018

Goodner Brothers Inc.

The identified internal control weakness of Goodners Brothers and

practices that are least implemented in the unit are :

1. Segregation of duties between employees.

2. Lack of Physical Security

3. Unrestricted Access to Inventories

4. Absence of Physical Counting

5.Untimely Recording Of Transactions

 The actions to be taken by the entity are :

1. There should be segregation of duties between employees who is handling the

transaction, delivery of items and receiving of payments. The duties should be
handled by different people in the organization.

2. Safety cameras or security cameras should be placed in the warehouse of the

company. This is to detect unknown access in the warehouse.

3. There should be limits in the access of inventories. Authorized person should

be known in the company.

4. The company should practice physical counting to know the actual number of
inventories in the warehouse.

5. The transactions of the company should be recorded on a timely basis.

Keeping a good record give updates about the details of each transactions. It also
give the realistic data of the company.

These actions should be done in the earliest possible time to avoid unnecessary
actions.