INTERNAL CONTROL PAPERThe procedures involved in accounts payable for Jamona.com is reviewed in detail and this paper assesses the strengths and weaknesses of their internal control system. The required additional controls to overcome the weaknesses are discussed in detail. The recommended and existing controls are analyzed and each control is identified as preventive, detective, or corrective.Overview of Internal ControlInternal control is the term used to describe the policies, plans, and procedures implemented by a firm to protect the assets of the organization. The internal controls are tools that the management, board of directors and other employees should abide by. Management ...view middle of the document...
Weaknesses of Jamona's internal controlsThe office manager only receives invoice in mail but does not verify or approve the invoices so as to determine the reliability of the payment. Only upon verification, the invoices should be forwarded to accounts payable. The responsibility of preparing bank reconciliation statement currently entrusted to accounts payable department should be revoked so as to mitigate fraud and financial reporting risks. Appropriate segregation of duties is very imperative in the accounting process. The accounts payable authorized to signs check is considered to be a weakness. There is a lack of documentation throughout the process. Another weakness in the accounts payable process is the lack of communication. Although the office managers works closely with the accounts payable department, there is not enough interaction between the two departments to assure that all transactions are being handled properly. The finally weakness of Jamona's accounts payable procedure is the lack of monitoring by upper management throughout the accounts payable process. Currently the processes rely on the accounts payable department and the office managers.RecommendationsThe office manager should apply detective internal control measures and all invoices should be duly verified prior forwarding them to accounts payable department. The preventive internal control measure should be implemented whereby a minimum of two authorized officers should sign the checks. An audit procedure needs to be included to verify the authenticity of random transactions. This detective control process will capture any deviations that occur from the expected standard process. As a preventive and detective measure access to sensitive data and information should be restricted. Responsible authorized individuals should be identified and they need to be given access to confidential data. The responsibility of preparing bank reconciliation statement currently entrusted to accounts payable department should be given to the office manager. This preventive control mitigates fraud and eliminates financial reporting risks. There should be a customized form that accompanies invoice which describes the transaction and justifies the payment on the account. By having documentation of the transaction, management can review all payments made to suppliers and make sure the expenses were justified (Marshall & McManus & Viele, 2003, p. 10).To increase the communication between the two departments, Jamona should establish monthly accounts payable review meetings. In the accounts payable review meetings, the company's management, accounts payable department and any other required individuals should determine if the appropriate amount is being spent on each account. Managers at various levels in the company should evaluate the design, operation of the procedures and initiate corrective action when specific controls are not functioning properly. Other processes previou...
