Identification of internal control weaknesses in Bucks Phyz sale process
This study deals with understanding the concept of corporate credit cards. As an accountant for Bucks Phyz, it is required to summarize the sales process for Bucks Phyz. In this, key relevant facts need to be mentioned in the current segment (Soh & Martinov-Bennie, 2015). The CEO of Bucks Phyz is well aware of this information but the overview of the report will help in bringing the report together for other readers as well. The current segment explains about identifying internal control weaknesses in Bucks Phyz sales process. The present study explains about the benefits and limitations of corporate credit cards with proper justification at the same time.
Bucks Phyz had faced several fraudulent behaviors in the accounting department within the company. In addition, Bucks Phyz shows interest in assessing the risks as well as present state of internal controls in its sales procedure in a challenging operating environment. The company could not pay for any unpleasant surprises or proceeds leakage under present situations or events (Simnett, Carson & Vanstraelen, 2016).
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Identification of internal control weaknesses in Bucks Phyz sale process |
Impact of these weaknesses could have on the organization |
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Sales representatives are accountable for auctioning all facet of internal control at Bucks Phyz (Simnett, Carson & Vanstraelen, 2016) Purchase orders are customary from prospective clientele based on simple e-mail verification to Bucks Phyz |
There is an increased risk that Bucks Phyz will incur bad debts. In addition, sales representatives have a conflict of interest for maximizing sales to customers whereas they are accountable to minimize the risk of bad debts that are arising. |
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Invoices are collected to the customers on acceptance of a customer order |
Basic customer data is directly derived from the sales contracts as well as entered into the billing system as a new customer profile (Moroney et al., 2014) |
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There is insufficient controls over gap of client accounts in the trade receivables ledger at Bucks Phyz |
There is high risk faced by Bucks Phyz at the time of making bonus payments based on non-completed sales transactions |
The auditor need to review manual as well as electronic oversight controls as it should be designed for safeguarding financial information and helping in maintaining the accuracy and integrity of cash receipts as well as data disbursement. Sales invoice dealings are presented in Bucks Phyz secretarial records without prior agreement from a accountable official of Bucks Phyz (Prasad & Green, 2015). The auditor need to check whether the cash receipts as well as disbursements controls takes into account supporting documentation requirements (Moroney & Trotman, 2016). The auditor further need to go through certain action steps for protected corporeal as well as electronic cash associated information and facts. It is noted that unauthorized transactions need to be entered in the accounting records of Bucks Phyz that result in imprecise coverage of financial facts as well as avoidable disputes with clientele and loss of client goodwill (Simnett, Carson & Vanstraelen, 2016). There is an increased risk of Bucks Phyz incurring losses based on bad dents that arises from sales of creditworthiness of customers as well as risk of loss. Auditors need to advice their client on several matters relating to accounting as well as control issues and this come under one of the internal control weakness at Bucks Phyz. Furthermore, an effective as well as efficient audit of internal control need the exercise of professional judgment where it displays the application of professional judgment to the specific risks in association with the financial reporting system of the client. However, an audit of internal control is basically determined on risk-based process. The auditor needs to identify the risks first on a risk-based process and start with a top-down evaluation of controls. It is thereby important to approach a given task in a way so that auditor can evaluate the higher risk areas with less potential for a material impact.
Impact of these weaknesses could have on the organization
Corporate credit cards help in achieving career goals as well as reaping personal benefits. In addition, these cards are a distinct group within the greater credit card universe that is separated from both personal as well as small business credit cards. If handled properly, these corporate credit cards can prove beneficial and should be used by the company to give their employees. Corporate credit cards help in simplifying the reimbursement process as well as reducing administrative hassles. Furthermore, corporate credit cards can support bad spending habits as well as stealing or fraud. On the contrary, corporate credit cards offer employees financial benefits as well as flexibility in spending (Knechel & Salterio, 2016).
There are several benefits of corporate credit card and this should be introduced within Bucks Phyz. The corporate credit cards will help in offering best travel as well as expense management solution to Business Company with worldwide recognition and modified solutions. By using corporate credit cards, individuals can earn high rewards points each time they transact and get more money out of it (Simnett, Carson & Vanstraelen, 2016).
Some of the benefits of corporate credit cards are mentioned below with proper justification:
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Benefits linked with corporate credit cards |
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Less stress for employees |
One of the benefits of corporate credit card is that using this corporate credit card can be burden for the employees mainly for those who receive modest salaries. The employees will be grateful to the credit card company who will handle the paperwork (Junior, Best & Cotter, 2014). |
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Shorter processing time |
One of the benefits of corporate credit cards is shorter processing time. By using this card, employees can save data entry time by downloading as well as importing the credit card transactions. |
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Additional card benefits |
One of the benefits of corporate credit cards is getting access to additional card benefits (Simnett, Carson & Vanstraelen, 2016). |
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Tracking and control spending |
One of the benefits of corporate credit cards is tracking as well as control spending. Employee corporate credit cards give business owners incredible control over their employee’s expenditures (Hardy & Laslett, 2014). |
Risk associated with corporate credit cards
There are several risk associated with use of corporate credit cards and these risk are listed below with proper justification:
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Risk associated with corporate credit cards |
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Personal expenses on the company card- |
One of the risks associated with corporate credit cards are personal expenses on the company card. |
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Bad spending habits |
One of the risks associated with corporate credit risk are bad spending habits. Even if employees do not use company cards for personal purchases, the bill may be bigger with corporate credit card. |
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Credit card theft |
One of the risks associated with corporate credit cards is credit card theft. Handing out credit card increases the risk that a card could be physically stolen or facts could be compromised. |
The auditor needs to test the controls within Bucks Phyz by reducing the amount of transactions testing. Several internal controls are present over sales cycle at Bucks Phyz that takes into account sales invoices as well as purchase order and authorization over receivables write-offs. In addition, the auditor of Bucks Phyz need to select random sample of transactions as well as examine the related purchase orders as well as invoices and customer statements (Hardy, 2014).
The auditor of Bucks Phyz is responsible to render declaration on the numbers and uncovering member of staff or owner fraud within the company. It is important for the auditor to check the purchase orders as it uncover common fraud within the company where an employee’s creates sales in a challenging work environment (Diatmika, Irianto & Baridwan, 2016). Bucks Phyz need to audit for its own procedures as well as transactions in the most appropriate way
Internal controls need to be implemented by Bucks Phyz and the audit should evaluate daily operating procedures for looking at the scenario on whether the business has clearly defined procedures as and when required (Bodnar & Hopwood, 2013).
It is recommended to CEO of Bucks Phyz regarding who should be getting corporate credit card facility. The corporate credit cards should be issued to the employees of Bucks Phyz so that they can use for legitimate business expenses. The employees who will be given this corporate credit card, they need to submit receipts for their spending with the company. The employees cannot use corporate credit cards for their own personal funds for covering the business expenses (Carson, Fargher & Zhang, 2016). Using corporate credit cards will help the employers to closely monitor the spending of their employees especially when employees are out of office for travelling purpose. The employees at Bucks Phyz, who make regular purchases, should be issued these corporate credit cards, as they will get additional benefits to it.
Reference List
Bodnar, G. H., & Hopwood, W. S. (2013). Accounting Information Systems: Pearson New International Edition. Pearson Higher Ed.
Carson, E., Fargher, N., & Zhang, Y. (2016). Trends in auditor reporting in Australia: A synthesis and opportunities for research. Australian Accounting Review, 26(3), 226-242.
Diatmika, I. W. B., Irianto, G., & Baridwan, Z. (2016). Determinants of Behavior Intention Of Accounting Information Systems Based Information Technology Acceptance. Imperial Journal of Interdisciplinary Research, 2(8).
Hardy, C. A. (2014). The messy matters of continuous assurance: Findings from exploratory research in Australia. Journal of Information Systems, 28(2), 357-377.
Hardy, C. A., & Laslett, G. (2014). Continuous Auditing and Monitoring in Practice: Lessons from Metcash’s Business Assurance Group. Journal of Information Systems, 29(2), 183-194.
Junior, R. M., Best, P. J., & Cotter, J. (2014). Sustainability reporting and assurance: A historical analysis on a world-wide phenomenon. Journal of Business Ethics, 120(1), 1-11.
Knechel, W. R., & Salterio, S. E. (2016). Auditing: Assurance and risk. Taylor & Francis.
Moroney, R., & Trotman, K. T. (2016). Differences in Auditors’ Materiality Assessments When Auditing Financial Statements and Sustainability Reports. Contemporary Accounting Research, 33(2), 551-575.
Moroney, R., Campbell, F., Hamilton, J., & Warren, V. (2014). Auditing: A Practical Approach. Wiley Global Education.
Prasad, A., & Green, P. (2015). Organizational competencies and dynamic accounting information system capability: impact on AIS processes and firm performance. Journal of Information Systems, 29(3), 123-149.
Simnett, R., Carson, E., & Vanstraelen, A. (2016). International Archival Auditing and Assurance Research: Trends, Methodological Issues, and Opportunities. Auditing: A Journal of Practice & Theory, 35(3), 1-32.
Soh, D. S., & Martinov-Bennie, N. (2015). Internal auditors’ perceptions of their role in environmental, social and governance assurance and consulting. Managerial Auditing Journal, 30(1), 80-111.
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