a) Effectiveness of the following control in preventing fraud in an organization.
i) Segregation of duties
Assigning different people the responsibilities of authorizing transactions, recording transactions,
and maintaining custody of assets. Segregation of duties is intended to reduce the opportunities
to allow any person to be in a position to both perpetrate and conceal errors or fraud in the
normal course of the person's duties.
Certain control activities may depend on the existence of appropriate higher level policies
established by management or those charged with governance.
For example, authorization controls may be delegated under established guidelines, such as
investment criteria set by those charged, with governance; alternatively, non-routine transactions
such as major acquisitions or divestments may require specific high level approval, including in
some cases that of shareholders
ii) Physical controls
Controls that encompass:
- The physical security of assets, including adequate safeguards such as secured facilities
over access to assets and records.
- The authorization for access to computer programs. and data files.
- The periodic counting and comparison with amounts shown on control records (for
example, comparing the results of cash, security and inventory counts with accounting
records).
- The extent to which physical controls intended to prevent theft of assets arc relevant to
the reliability of financial statement preparation, and therefore the audit, depends on
circumstances such as when assets are highly susceptible to misappropriation.
b) Suitable internal control system for wage
- Segregation of duties between HR and payroll functions
- Personnel files held for all employees.
- Authorisation procedures for hiring, terminating, time worked, wage rates, overtime,
benefits etc.
- Any changes in employment status of employees (e.g. maternity, special leave etc.)
informed to Human Resources department.
- Use of time clocks to record time worked.
- Clock cards apprpved by supervisor.
- Only employees with valid employee numbers are paid.
- Payroll budgets in place and reviewed by management.
- All starters, leavers, changes to salaries and deductions are reported promptly to payroll
department and changes are updated to the payroll master file promptly.
- Verification of payroll amounts and benefits calculations
Kavungya answered the question on May 14, 2019 at 13:04
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