Internal control exercise (1)

DANANG UNIVERSITY OF ECONOMICS INTERNAL CONTROL EXERCISES MULTIPLE CHOICES QUESTIONS: Organizational governance structure emphasizes the core issues: A Professional competence and ethics of members of the organization B Authority and role of members of the organization C Organizational structure D Performance and accountability of members of the organization Risk tolerance is an acceptable variation in operating performance related to achieving the organization's objectives Which of the following statements is not true about setting risk tolerance: A Determining risk tolerance is part of the organization's objective setting process B Risk tolerance is best measured by using unit of measurement as the unit of measurement for the objectives of the organization C Setting risk tolerance is a prerequisite for determining how to cope with risks and related control activities D Controlling operations within risk tolerance level always ensures the organization achieves its established objectives Identifying and analyzing risk is a continuous iterative process undertaken to strengthen the organization's ability to achieve its objectives Which of the following criteria not evaluate the significance of risk: A Resources used to deal with risk B The speed of influence of risk when arising C Persistence or duration of time of impact after risk arises D The likelihood of risk and the impact level of risk Information is a factor of an organization's internal control system Which of the following reflects information as a part of an internal control system: A Sources of information of an organization come from inside and outside of that organization and they are very rich and diverse; therefore, the organization needs to control sources of information tightly and reasonably to ensure information is reliable and suitable for use B The managements collect or generate and use qualitative and appropriate information from outside and inside the organization to support the operation of other components of internal control system C The management collect or generate and use qualitative and appropriate information from outside and inside the organization to plan, implement the plan and check the implementation toward the achievement of the organization’s objectives D The information system of an organization is set up to collect, process and provide information and through which the information system of the organization performs functions of checking and controlling activities of the organization An internal control system provides a reasonable assurance that objectives of an organization can be achieved Which of the following is not true about setting the objectives of the organization: A The objective of making a quick report may be part of objectives which assure the effectiveness of the organization B The objective of making a quick report may be part of objectives which assure the reliability of organization's reports C The objective of improving product quality may be part of objectives which assure the reliability of organization's reports D The objective asset protection is basically part of objectives which assure the effectiveness of operations of the organization The cost variance analysis and fire alarms are respectively which type of control: A Preventive control and preventive control B Detective control and preventive control C Detective control and detective control D Preventive control and corrective control An organization establishes organizational structure, reporting lines and appropriate authorities and responsibilities towards the realization of the organization's objectives In relation to internal control, A Establishing organizational structure creates clear accountability and effective information flow throughout the organization B Establishing organizational structure helps management to review and evaluate organizational structure in ensuring the suitability and effectiveness of internal control system C Establish organizational structure helps the top management and management levels in organizing the implementation of decisions towards achieving organization’s objectives D None of above Organization must demonstrate its commitment to integrity and ethical values Which of the following does not belong to this commitment: A Organization needs to establish appropriate authority and responsibility B Organization needs to assess compliance with the ethical values and integrity of all members of the organization C Organization must establish a message from senior management or a common tone in reaching organization’s objectives D Organizations must establish codes of ethics that guide behaviors and activities toward achieving organizational objectives Maintaining information quality is essential to obtaining an effective internal control system Which of the following does not affect the quality of information: A Accessing to sensitive information is restricted to only the authorized persons B Information is easily accessible by persons (authorized) who need to use C Data collected must be up to date and collected at a necessary frequency D None of above 10 Organizations need to set objectives clearly so that they can identify and evaluate risks that may affect their objectives Which of the following is not true when specifying an organization's objectives: A Specifying operation objectives clearly helps organization to allocate resources appropriately B Financial reporting objectives consistent with requirements of accounting principles are applied in accordance with organization’s characteristics, ensuring the preparation of reliable financial statements C Compliance objectives are generally ranked behind operation objectives and reporting objectives on level of priority, requiring organizations to comprehend which laws and regulations are applied to their operations D Specifying objectives requires organization to consider the importance of objectives and the priorities in implementing objectives 11 Organizations select, develop, and implement ongoing and separate evaluations for internal control system When performing evaluating activities for internal control system, the organization should consider the following issues, except: A Review the information requirement of management levels in implementing management functions B Appoint assessors who have relevant competence and fully understand what is being evaluated C Consider level of change in business activity D Establish a baseline understanding of design and status of internal control system 12 The success of applying codes of ethics in an organization is determined by: A Codes of ethics need to be communicated to all managers and staffs at all levels in the organization B The leadership role of management levels in the organization C Self-consciousness of members in the organization D Codes of ethics need to be promulgated in writing 13 Organizational governance structure consists of the following components, except: A Regulations and Laws B Independent Audit C Codes of Conduct D None of relevant options 14 Control activities are the actions established through policies and procedures that help ensure that management’s directives to mitigate risks to the achievement of objectives are carried out Which of the following does not belong to control activities: A Control activities are primarily set up to support the achievement of operational objectives of the organization B Control activities support all other components of internal control system but especially coordinating closely with the Risk assessment component of internal control system C Control activities include the implementation of segregation of duties principle D Control activities are performed at all levels of organization, at all stages of organization's business operations and in the IT environment 15 Separate evaluations of internal control differ in frequency and scope Which of the following is not true about separate evaluation of internal control: A The result of ongoing evaluation of internal control affects separate evaluation of internal control system B Separate evaluation of internal control are integrated into day-to-day operations of the organization C Scope of separate evaluation of internal control is determined by the type of objectives (operating, reporting or compliance) assessed D Separate evaluation of internal control depends on significance level of risk and method of risk responses 16 Function of Board of Directors usually focuses on the following areas, except: A Strategic planning and organizational structures B Delegation of management authority and responsibility C Establish the vision, mission and values of the organization D Establish appropriate organizational structure, reporting lines, authorities and responsibilities towards the implementation of organization’s objectives 17 Monitoring activity evaluates whether the components of an organization's internal control system exist and operate as desired Which of the following does not belong to monitoring activities: A Review of operating reports (such as production reports, sales reports) to detect and correct unusual issues that arise in the execution of transactions B Ongoing evaluation is carried out in business activities of the organization and in all departments of the organization C Analysis of causes of problems arising in the operation of an organization, from which, weaknesses of internal control system are identified to improve D None of above 18 An organization's internal control only provides a reasonable assurance of achieving organization's objectives Which of following is not correct: A The ability to achieve organizational objectives is determined entirely by the effectiveness of internal control system B The ability to achieve organizational objectives is affected by inherent limitations of internal control system C Reasonable assurance does not mean internal control will help organization always achieve its objectives D People, costs and uncertainty factors coming from inside and outside the organization limit the effectiveness of organization's internal control 19 Specific direct responsibilities of members of BOD may include, except: A Determine the strategic objectives of the organization B Establish an internal control system for the organization C Appoint the senior managers of the organization D Monitor implementation process of organizations’ objectives and policies 20 Internal control is not an event or circumstance, but a repetitively flexible process, and A Internal control is activities integrated in the organization's activities and in the manner of managing the organization B Internal control processes are daily managed by basic management activities: planning, implementing and checking C Internal control needs to be set up separately from organization's activities to ensure the effectiveness of internal control D Internal control processes have no significant impact on cost of organization 21 On the basis of corporate governance, non-executive board members are considered to play a key role in executing responsibility towards organization The greatest significance these members bring to the operation of the BOD is: A Knowledge and special expertise B Extensive experience C Fairness and impartiality D Objective criticism 22 Which of the following types of control does not belong to control activity? A Set up and use standing data to support handling transactions (e.g price lists) B Approvals and authorizations C Physical controls D None of relevant options 23 Which of the following is not true: A Control environment is part of control culture including factors such as ethical values and integrity, supervision, accountability, and performance assessment B Control environment is a fundamental component of internal control, supporting risk assessment, implementation of control activities, operation of information and communication systems, and implementation of monitoring activities C Control environment consists of standards, processes and structures that guide members at all levels in the organization to execute their responsibilities in internal control and implement decisions towards the achievement of organization’s objectives D None of above 24 There are different bodies that can perform separate evaluation of internal control Which of the followings is not a body that performs separate evaluation of internal control? A Internal control evaluation is performed by internal audit B Internal control evaluation is performed by the manager of each department, evaluating the design and operation of the internal control of that department C Internal control evaluation is cross-performed among departments of the organization D None of above are relevant 25 Communicating with parties outside organization affects the manner by which external parties interact with the organization For example, management discusses policies and procedures that the organization applies to supplier acceptance and the requirements that suppliers must comply, helping ensure that the supplier meets the requirements of the organization and prevent possible violations This indicates that communicating with external parties directly influences: A Monitoring activity of the organization B Control activity of the organization C Risk assessment activity of the organization D Control environment of the organization 26 As a factor in the control environment, organizations must executing oversight responsibility Which of the following does not belong to this issue: A The Board of Directors and senior management of an organization need to develop succession plans for personnel to appoint important responsibilities in the internal control system B The Board of Directors needs to demonstrate independence from management and have necessary skills and qualifications to perform the oversight function C The management is directly responsible for the development and operation of internal control system of the organization under the supervision of the Board of Directors D The Board of Directors needs to monitor the development and operation of the internal control system of the organization 27 Recruiting qualified employees and segregation of duties are respectively which type of control A Detective control and detective control B Preventive control and detective control C Preventive control and Preventive control D Detective control and corrective control 28 An organization must always assess risks adequately to cope with the risks Which of the following is beyond the scope of risk identification and risk assessment: A Based on the risk identification and risk assessment, management should identify risk responses to deal with risk in one of the following approaches: risk avoidance, risk acceptance, risk mitigation, and internal control B Management must consider the impact of possible changes in the external environment and in the organization's operating model which may cause risks to change and internal control to be less effective C Management must determine the acceptable level of risk cautiously, striving to maintain the risk within an acceptable level D A prerequisite for risk assessment is the establishment of objectives which are measurable and interlinked across organizational levels 29 The organization needs to communicate necessary information to support the operation of components of internal control system As part of internal control, the information that communication function communicates within the organization includes the following information, except: A Importance, suitability, and benefits of an effective internal control B Operation reports such as production reports, sales reports C Roles and responsibilities of management board and members in implementing internal control D Important issues related to internal control including weakness cases, non-compliance with internal control requirements 30 Internal control is set up and operated by management board and management at all levels in the organization under the supervision of the Board of Directors Which of the following is not true: A People set organization’s objectives and establish internal control mechanisms to ensure objectives are achieved B The Board of Directors and senior management of the organization set up tone of the top relating to the importance of internal control and codes of ethics applied throughout the organization C Internal control is implemented by people of the organization through what is done and saying D Each individual shows differences during their training process, professional competence and the difference in needs and priorities Therefore, the internal control system of the organization is difficult to obtain consistency in operation CASES: CASE 1: GC is a Fashion &clothing retailer The company's operation is mainly run in many branches in different provinces The main market of the company focuses on the 15-35 age group with low or medium price products Company has an internal audit department but its current role is to only perform stocktake at stores at the end of each quarter, but it is often impossible to perform stocktake at all stores at the same time Order process There is one branch and stores in each province Each branch has one branch manager, one accounting department and store managers The purchasing demand of each branch expressed in items, quantity of each item, supplier, and price, are reported via email to the central supply department of the company in HCM city An employee of the central supply department combines all orders in each region, such as the North, North Central, Central and Central Highlands, South West, Southeast and then sends Order Summary Table of regions to the company’s supply manager for review and approval On that basis, all branches carry out orders and purchases from suppliers The branch manager is the person who determines the inventory level of each item for each store based on his own evaluation The monthly inventory management of items is based on inventory levels of these items When the inventory level of items in each store downs to the upper inventory level, the branch manager will aggregate to order for the items of the entire branch Ordering is carried out at the end of each month and it takes about 3-4 weeks for goods to arrive at the store Receipt of goods and invoices To reduce the time from ordering to receiving goods, goods are directly delivered from the supplier to the stores Upon receipt of goods, goods are verified by the store’s salesman, reconciled with the supplier's shipping documents, then the goods receipt staff make a Goods received note The receipt of goods is carried out at the end of the day so as not to affect selling activities of the store A duplicate of the invoice is then transferred to the branch office for comparison with the supplier’s invoice Invoice is sent by the supplier to the accounting department of the branch When the invoice is received, the accountant at the branch will reconcile with the Goods received note received from the store This is a time-consuming job due to a large amount of documents After reconciliation, invoices, Goods received note are entered into the accounting system Stocktake and handling defective goods At the end of each month, the branch accountant together with staffs of the store performs stocktake at the store, reconcile it with the book records and make a report for the over three- month unsold inventories The branch manager based on the stocktake report of each store and the slow-moving items report to process Slow-moving items are generally sold at prices lower than the cost of 30-70% at stores Require: Identify key risks, internal control’s weaknesses and recommend internal control measurements and management solutions for remediation GC nhà bán lẻ quần áo thời trang Hoạt động công ty chủ yếu hoạt động nhiều chi nhánh tỉnh khác Thị trường cơng ty tập trung vào nhóm tuổi 15-35 với sản phẩm giá thấp trung bình Cơng ty có phận kiểm tốn nội vai trò thực việc kiểm kê cửa hàng vào cuối quý, thường khơng thể thực việc kiểm sốt tất cửa hàng lúc Quá trình đặt hàng Ở tỉnh có chi nhánh cửa hàng Mỗi chi nhánh có giám đốc chi nhánh, phận kế toán quản lý cửa hàng Nhu cầu mua chi nhánh thể mặt hàng, số lượng mặt hàng, nhà cung cấp, giá cả, báo cáo qua email đến phận cung cấp trung tâm công ty TP Hồ Chí Minh Một nhân viên phận cung cấp trung tâm kết hợp tất đơn đặt hàng vùng, Bắc, Bắc Trung, Tây Nguyên Tây Nguyên, Tây Nam, Đông Nam Bộ sau gửi Bảng Tổng hợp Đơn đặt hàng đến người quản lý cung cấp công ty để xem xét phê duyệt Trên sở đó, tất chi nhánh thực đơn đặt hàng mua hàng từ nhà cung cấp Người quản lý chi nhánh người xác định mức tồn kho mặt hàng cho cửa hàng dựa đánh giá riêng Quản lý hàng tồn kho hàng tháng mặt hàng dựa mức tồn kho mặt hàng Khi mức tồn kho mặt hàng giảm xuống mức tồn kho trên, người quản lý chi nhánh tổng hợp để đặt hàng cho mặt hàng toàn ngành Đặt hàng thực vào cuối tháng phải 3-4 tuần để hàng đến cửa hàng Rủi ro: nhu cầu mua hàng bị khai khống nhu cầu mua hàng hình thành từ chi nhánh chuyển tt để phê duyệt, tt có tách biệt vs qtrinh khởi phát q trình mua hàng nên có khả năng, đề xuất đề xuất ( sở thực gian lận) , phê duyệt k đc chặt chẽ, cụ thể chi nhánh khai khống lượng hàng cần mua(0%-100%), đề xuất mua vs giá khơng hợp lí, khống lượng khó xảy khống giá, dễ bị phát sai phạm khai khống giá Che đậy khống lượng: ghi nhận khống dạng bán hàng chưa thu đc tiền, treo nợ, trường hợp cty ktra, dùng thủ thuật gối đầu (ghi nợ chưa thu cho A, sau thu nợ B gi trả nợ cho A, bán hàng C ghi trả nợ cho B, gối đầu đến mãi); đánh hàng lỗi thời bán giảm giá, bán nửa giá so vs giá bth, hàng chưa lỗi thời đánh giá bị lỗi thời 50%, sau bán thu tiền bình thường - nhu cầu đặt hàng k phù hợp vs thực tế, thấy giảm hàng tồn kho xuống mức tồn kho tối thiếu yêu cầu mua, nhiên đối vs mặt hàng thời trang quan trọng đến xu hướng thời trang  cần phải có phê duyệt quản lí bán hàng( người xem xét thị trường tiêu thụ, bắt kịp xu hướng thời)  đề xuất: đề xuất lên nhu cầu mặt hàng, quy cách, chủng loại, lựa chọn nhà cc, thương thảo chọn lựa cách thức mua hàng - yêu cầu cửa hàng dự toán tiêu thu,lập báo cáo bán hàng báo cáo công nợ để cấp theo dõi tình hình tiêu thụ thực tế, cửa hàng phải báo cáo thu nhập, doanh thu hàng tuần, hàng tháng để trung tâm quản lí, phân tích dấu hiệu bất thường Biên nhận hàng hố hóa đơn Để giảm thời gian từ đặt hàng đến nhận hàng, hàng hoá vận chuyển trực tiếp từ nhà cung cấp đến cửa hàng Khi nhận hàng, hàng hoá xác nhận nhân viên bán hàng cửa hàng, đối chiếu với tài liệu vận chuyển nhà cung cấp, sau nhân viên thu hàng nhận giấy báo nhận hàng Việc nhận hàng thực vào cuối ngày để không ảnh hưởng đến hoạt động bán hàng cửa hàng Một hóa đơn sau chuyển đến văn phòng chi nhánh để so sánh với hóa đơn nhà cung cấp Hóa đơn nhà cung cấp gửi đến phòng kế tốn chi nhánh Khi nhận hoá đơn, nhân viên kế toán chi nhánh hồ giải với hàng hố nhận giấy báo nhận từ cửa hàng Đây công việc tốn nhiều thời gian lượng lớn tài liệu Sau đối chiếu, hoá đơn, hàng hoá nhận ghi nhận ghi vào hệ thống kế toán Yếu kém: việc kiểm nhận hàng vào thời điểm cuối ngày k hợp lí, nhân viên k đủ tập trung rủi ro: kiểm k đắn, chấp nhận mặt hàng yếu kém, k đảm bảo chất lượng biện pháp: việc nhận hàng nên diễn tập trung chi nhánh, sau chi nhánh chuyển hàng cho hàng, nghiêm túc, khách quan, việc giao nhận hàng xảy thời điểm Q trình kiểm kê: Lương mà bắt làm nhiều, làm vừa đủ, lười biếng, trách nhiệm thấp Thông đồng với gian lận  nhân viên làm phải có giám sát quản lí cấp quản lí phù hợp để giám sát, đạo Hàng lí có rủi ro lớn: giá trị lí đánh giá thấp nhiều so với giá trị thực tế Thu gom xử lý hàng hoá bị lỗi Vào cuối tháng, kế toán chi nhánh với nhân viên cửa hàng thực việc lưu kho cửa hàng, đối chiếu với sổ sách lập báo cáo cho hàng tồn kho chưa qua ba tháng Người quản lý chi nhánh dựa báo cáo hàng tồn kho cửa hàng mặt hàng di chuyển chậm báo cáo để xử lý Các mặt hàng di chuyển chậm thường bán với mức giá thấp chi phí 30-70% cửa hàng Yêu cầu: Xác định rủi ro chính, điểm yếu kiểm sốt nội đề xuất biện pháp kiểm soát nội giải pháp quản lý để khắc phục CASE 2: AC Company is a distributor of office equipment While executive directors are sure that product improvements boot revenue, managers are not sure that internal controls for revenue and trade receivables meet objectives Therefore, you are invited as an internal control expert to review the entire system and give recommendations in order to improve internal control system of the company Considering the revenue and trade receivables system, you found the following issues: payroll department will exclude that worker from the payroll from the next payment Require: Identify key risks, internal control’s weaknesses and recommend internal control measurements and management solutions for remediation CASE Company A has a branch in a remote province The function of the branch is to receive goods from the company's warehouse, manage inventories at the branch and sell goods for the company Each year, based on the business plan, the company assigns the sales target to the branch The branch manager is allowed to open a bank account for the operation of the branch The operation of the branch incurs expenses and the branch manager has a right to make decision on these expenditures Periodically, every month, the branch manager must report on the goods consumption status and transfer money collected in every month from customers to the company’s account (after subtracting actual expenses at the branch and keeping a reserve amount for the operation of the branch) Require: Identify key risks, internal control’s weaknesses and recommend internal control measurements and management solutions for remediation Rủi ro: - chiếm đoạt hàng cách bán khống, dùng thủ thuật gối đầu - chưa bán hàng bán khống để chạy tiêu doanh thu nhận thưởng - lạm dụng sở vật chất, thương hiệu chi nhanh để kinh doanh riêng - lấy cắp hàng bán báo hàng bị hỏng, bị bể, bị bay - tráo hàng - chi nhánh đc quyền chi chi phí hợp lí thường chi phí chi nhánh bịa  dấu hiệu: doanh thu giảm, tiền nộp ít, k theo tỉ lệ tương ứng với doanh thu  phải kiểm tra đột xuất  biện pháp kiểm soát: - khoán doanh thu cách giao tiêu cho chi nhánh, biểu DT bị giảm thấp so vs kì trc, so vs chi nhánh kì, so vs tiêu có dấu hiệu rủi ro, gian lận, phải ktra ,kiểm soát Chính sách quản lí: sách thưởng đạt tiêu, để khuyến khích bán hàng - ksoat doanh thu gắn liền với cơng nợ - khốn chi phí theo doanh thu: chi phí nhiều, đơn lẻ, k ksoat đc + theo tỉ lệ theo doanh thu + lương tỉ lệ theo doanh thu + lập dự tốn chi phí để ksoat chi phí + định mức chi phí + CASE AC Company is a distributor of office equipment While executive directors are sure that product improvements boot revenue, managers are not sure that internal controls for revenue and trade receivables meet objectives Therefore, you are invited as an internal control expert to review the entire system and give recommendations in order to improve internal control system of the company At the AC Company, there are four accountants and one treasurer - Chief Accountant is an experienced person, responsible for managing the accounting department - General accountant is in charge of general accounting and financial reporting The general accountant also tracks fixed assets and inventories - Sales and account receivables/ payables accountant is responsible for tracking sales, receivables and payables - Payment accountant is in charge of recording expenditures, proceeds and other payments - Treasurer keeps cash on hand at the company The company has a lot of customers and on the basis of monitoring customer debt, the account receivables accountant is also the person collecting money from customers Within a day, after collecting money from customers, the account receivables accountant will compile a list and submit it to the chief accountant for review and approval The chief accountant checks the amount collected carefully, reconciles with the list and signs on the money collected list Then, the account receivables accountant transfers collected amount to the treasurer The treasurer reconciles amount received with the list, making a receipt to collect money Based on the receipt, the payment accountant records on the cash book, the account receivables accountant writes down the receivable amount of customers based on the list Require: Identify key risks, internal control’s weaknesses and recommend internal control measurements and management solutions for remediation CASE 6: The following paragraph is extracted from the description of the tuition fee collection process of a school: The Technology and Technical department develops software QLDT 2.0 This is the tuition fee management software (entering tuition fee, tracking tuition fee, searching tuition fee, listing and reporting and etc.) and training management (Reports: marks, transcripts, certificates, attendance list; Tools: transfer class, database import, class classification, statistics; education program; grades management; student records management; consideration for the graduation requirements; student card printing, etc.) Head of the Technology and Technical department delegates authority, provides each department, each person having related work a separate user account and password All staffs in the unit can view all data in this program but cannot edit or delete the data Only staffs in the corresponding departments can edit, delete the data belonging to their work For example, tuition fee division can input and edit the tuition fees, view marks of students but cannot edit them Head of the Technology and Technical department is the administrator for this software The Head of this department is a person who decentralizes authority, provides user accounts and has the right to intervene in the work of all divisions, add, edit or delete database in the software When the data is faulty or there are errors or frauds, only the Head of Department has the right to access to the software to select the user account and view their work log, from which the Head of department traces who will have responsibility for the deficiencies and frauds Require: Identify key risks, internal control’s weaknesses and recommend internal control measurements and management solutions for remediation CASE Fresh Food Company C is a supplier of poultry products This company is experiencing operation years with declining business performances While executive director firmly believes that new products will boot the sales revenue, he is not confident about internal controls for sales and collection cycle Therefore, you are invited as an internal control expert to review the internal controls in this cycle and propose necessary recommendations After reviewing the sales cycle and receivables management at the company, you note the following information: (1) Company C rents farms to raise poultry and provides the farms with breeds, food, medicines and technology During the contract period between farms and the company, company sends technicians to the farms to guide the farmers and monitor the poultry raising process When the poultry is ready for harvest, company's sales staffs will go to the farms and sell the poultry Farmers are paid a fixed amount to execute the contract with the company (2) Sales staffs of the company are responsible for finding customers and when customers are found, they will take the customers to the farms to get the goods and complete procedures Together with the customer, the company's sales staff weighs poultry’s weight and a weight ticket is made to record the weight of the poultry with the signatures of the farmer, customer and salesperson Then, the salesman issues an invoice with the sales price regulated in the company’s price list A duplicate of the invoice and weight ticket are sent to sales accountant to record the sales transaction All transactions customers buy on credit are approved by sales manager of the company on the basis of credit limit and account receivables balance (data provided by the account receivables accountant of the company) Customers buying goods on credit have one month to make payments The sales staffs of the company are also the persons who are in charge of collecting money directly from customers and transferring the money collected to the company at the end of each week (3) The company applies the bonus based on revenue policy on the basis of aggregating sales revenue from sales invoices At the end of each month, the sales manager aggregates the sales revenue of each salesperson and transfers the Aggregate revenue table of the salesman to the payroll accountant to execute bonus payment procedures for the salesperson The bonus level is calculated for each achieved level of revenue after reaching the minimum revenue level Require: Identify key risks, internal control’s weaknesses and recommend internal control measurements and management solutions for remediation CASE Company A is a company providing transportation services The company has a fleet of trucks under the control of the business planning department Recently, as the business goes up, the company has signed many contracts with many different customers However, the number of cases of damage and repair of trucks reported is increasing When the truck is broken, the team leader will report the damaged truck for having it repaired and on the basis of being approved by the director, the team leader carries out procedures to ask for an advance on repairing expenditures at the accounting department and then repairs the truck After the truck is repaired, the team leader and driver will carry out payment procedures for the advance amount at the accounting department The repairing expenses in the last quarter increased sharply, negatively influences the operating performance of the company Request: Identify key risks and necessary control procedures to cope with risks during the advance and advance payment of repairing trucks for company A CASE At the transaction office An Toan of Tin Cay bank in a central province, there are the following personnel positions: Nguyen Thi Lan - Treasurer of the transaction office, Le Thi Le - Head of the treasury department and Vo Van Vang- Director of the transaction office Taking advantage of her position, Lan stole money and gold of the transaction office many times by changing the balance at the end of the day To steal gold, Lan took a portion of the gold bag since Lan knew that Vang and Le only checked the gold bag without checking the quantity inside, so they did not detect Lan’s fraud Therefore, Vang and Le daily performed cash count and signed confirmation to confirm the ending balance However, one day, Lan was busy, so Vang and Le directly performed cash count to report and they found the amount of cash and gold was less than the amount on the management software of the transaction office and the cash count sheets However, Vang and Le still signed on the cash count minutes specifying that the balance of cash and gold was correct On the day after being detected, Lan admitted to having stolen money and gold of the transaction office with Vang and Le According to Lan, she sold the stolen gold but suffering losses After discussing, Vang and Le decided to let Lan deal with the problem herself Therefore, Vang and Le did not report to the bank and ignored the prescribed control procedures, daily still signed the cash count minutes With the ignorance of the superiors, Lan continued to embezzle money and gold of the transaction office The incident was discovered when the Tin Cay branch sent staff to the transaction office to work, check the treasury and compare it with the general ledger at An Toan transaction office Require: Analyze why violations at An Toan transaction office can occur Discuss factors of control environment of Tin Cay bank that can help to cope with these violations at An Toan transaction office CASE 10 X & D Company is a petroleum trading unit Recently, the company received information that drivers of gasoline tank trucks stole gasoline while delivering gasoline to stores Normally, the gasoline tank trucks have to collect gasoline in the warehouse and then transport them to petrol stations On 3/8/20XX, after receiving gasoline at the company's warehouse, a gasoline tank truck with the number plate 15UV went to an empty land on the outskirts of the city When entering there, the driver quickly climbed onto the truck and checked the amount of fuel remaining and at the same time, the pump was also thrown into the drum barrels already put under the truck After about 10 minutes, a 200-liter drum barrel was fully filled by the gasoline After that, the pump was continuously moved to other barrels The amount of gasoline stolen from the gasoline tank was up to hundreds of liters Leaving the empty land, the truck 15UV moved to petrol stations to provide petrol for retailers Although having checked by eye and measuring equipment, owners of these stores still could not detect anything unusual, the delivery of goods took place very quickly Require: Explain the way gasoline was stolen by the drivers of gasoline tank trucks at the X & D Company and recommend internal control measurements to solve the problem CASE 11 A company has regulations: sales staffs are responsible for finding new customers and managing debts of their customers The bonus level for the salesperson is also based on the revenue generated from those customers Since customers are in many provinces, in many cases of debt collection, sales staffs directly carry cash collected to the company to submit to the accountant Require: Identify risks in the management of above company Propose necessary control procedures to prevent risks Design the necessary forms related to the above control procedures (if any) Present key risks, the issues leading to those risks, and the remedies for the following cases: The salesperson is responsible for the following functions: - Finding customers, making sales decision (including selling on credit) - Taking goods from company’s warehouse to deliver to customers - Issuing 3-duplicate invoice: for save, for client and for transfer to the accounting department - Tracking customers’ debts and collecting money Once collecting the money, submitting it to company’s bank account Salespersons are rewarded based on revenue CASE 12 In order to increase lending revenue and promote personal accountability, a commercial bank regulates that: staffs of Credit department perform all phases of the lending process: from receiving a loan application, reviewing the loan application, evaluating a prospective customer’s financial condition, making the loan proposal before the Head of Credit department makes decision Credit officers are also responsible for urging customers to pay debts and their salaries are associated with lending revenue and the ability customers pay debts at maturity Require: Analyze the risks related to bank's lending activities Why does the bank still accept those risks? Propose necessary control activities to prevent possible violations CASE 13 A store selling construction materials is an agency of many companies that supply materials, organizing sales by delivering goods to customers After observing product models displayed at the showroom, customers order quantity, design and agree on the price with the salesman at the store Purchasing a large quantity can be discounted according to promotion programs of partner companies Normally, customer will advance 30% of the value of the goods and will pay the remaining amount after receiving the goods Due to the breakage during construction, customers can call the store and ask the store to sell additional construction materials, and they will pay as soon as the goods are received Require: Analyze possible violations in the retailing operation of above store Propose necessary control procedures to minimize violations CASE 14 A drugstore sells retail drugs to consumers As regulations, all drugs have price lists The seller will sell drugs according to the prescription for the customer who has prescriptions from the doctor Since there are many similar products that have similar or the same uses, in some cases, the seller can change other drugs (still meet the requirements of treatment) due to prescription drugs have run out The sellers are also responsible for collecting money from customers but they not issue bills since they calculate money on scratch papers However, if being required to issue bills, the sellers can still issue for their customers In Vietnam, many people have the habit of buying drugs by their experiences or searching online, so with popular diseases, they go to the drugstore to buy immediately without the doctor’s prescription The above store still sells drugs for cases where there are no doctor’s prescriptions The store is a part of the distribution system of a pharmaceutical company Drugs of the store are supplied by the company According to the current regulation: every time goods are delivered to the store, those goods are considered being consumed and are recognized as revenue and a receivable from each store At the end of the month, based on the number of goods sold by the general store, the accountant of the company will adjust the revenue and receivables before preparing the financial statements Then, the accountant will adjust the cost of goods sold About the money collection, every 2-3 days, the company's accounting staffs go to each drugstore to collect the money of the previous sale dates Require: Identify key risks and propose internal control measurements to cope with those risks CASE 15 The training management department of a university has regulations of the score management as follows: - The transcript, after being approved by the head of subject, is photocopied in copies One copy is kept at the Faculties (staff of Faculty manages them), copies are kept at the Training department (1 is original), copies are delivered to the class The training department is responsible for publishing student grades through the class’s monitor - Scores of students will be tracked on books by the staffs of faculties and training department and will be checked and reconciled before considering grade retention (or grade repetition) or class promotion Discrepancies usually occur due to entry errors between the two divisions Due to a large number of students, the school decided to apply information technology in management IT specialist writing training management software is a staff of training department but he is not responsible for the management of grade retention or class promotion consideration of students All scores are transferred to the examination team under the control of headmaster Members of examination team will enter scores into the system Students will know their scores through the internal network of the university Grade retention and graduation consideration are also conducted by the staffs of faculties and training department as before Require: Identify key risks and propose internal control measurements to cope with those risks CASE 16 A construction team of a construction company received a lump sum contract in terms of labor to carry out a construction work of the company According to regulated terms, the construction team has the right to use local idle labor to carry out the construction work This labor is usually paid wage daily when they are hired and they don’t have labor contracts If the actual labor cost exceeds the assigned amount according to the lump sum contract, the team will bear the whole excess cost There are also some cases where the company will pay for the excess cost due to objective reasons but explanations need to be given If the actual labor cost is less than the assigned amount, the construction team will earn the difference The accountant of the team usually rationalizes documents in order to reasonably agree with the assigned amount Require: Analyze the advantages and disadvantages of the lump sum contract Analyze potential violations and necessary control procedures CASE 17 A company determines salary budget at 15% of revenue The whole monthly salary budget is distributed as follows: 50% for direct labor, 30% for indirect labor and 20% for salary allowance The salary allowance is used to pay for the basic salary in case the revenue of the company is too low and to reward ABC for employees at the end of the year The bonus level for the employee type B is fixed during the last years with the coefficient being while rate A is 1.2 and rate B is 0.8 Normally, the company pays twice a month The first payment is the payment for fixed salary based on the salary coefficient and basic salary The company will pay the remaining salary based on the actual revenue of the month Require: Analyze potential violations and necessary control procedures CASE 18 Give comments on issues related to salary in the following situations In your opinion, how does the situation solving method affect the relevant control objectives of a company? As requested by the chief accountant, meal for all laborers of a company is recorded as an expense but not included in laborers' incomes At present, company uses that money to prepare meals for employees who are shift workers The office staffs don’t eat but they receive money from the company Company pays salary for employees, including social insurance and health insurance Employees are responsible for self-payment of social insurance, health insurance for these organizations A service company determines salary budget based on profit without considering salary costs Company’s profit is only determined precisely at the end of the year; therefore, monthly, the company pays basic salary Quarterly, company will pay additional salary based on determined profit without considering salary cost CASE 19 The result of an unexpected cash count at a company in the month shows that the amount of cash on hand is greater than the balance recorded in the accounting book Require: Give reasons leading to above misstatement Propose necessary control procedures to prevent the above situation CASE 20 The accounting department of a unit has four employees, which is delegated as follows: The chief accountant is in charge of the whole unit and is responsible for approving all expenditures on the basis of established documents Bank deposit accountant is responsible for managing documents and making payments through banks Cash accountant monitors cash fluctuation, payroll and personal income taxes Treasurer is responsible for cash management The unit often incurs small expenditures and these expenditures are paid in cash, therefore, recently, the treasurer has been assigned an additional task which makes a list to track these expenditures Periodically 5-10 days, the treasurer aggregates the expenses from the list and makes a submission in order for the chief accountant to review and approve The payment voucher is then issued and recorded in the accounting book Require: Evaluate the risks related to expenditure activity at the unit Propose necessary control procedures to prevent possible violations CASE 21 Purchasing cycle, replacement of cheap items at a unit as follows: - The division using tools and equipment makes “Note of damaged supplies” to request replacement, procurement of new supplies - Manager of Equipment Management Department approves replacement and procurement request on the note and then submits it to the Deputy Director in charge for approval - After the request is approved, the Equipment Management Department conducts the procurement Since the unit usually purchases, the department usually contacts with traditional suppliers to provide supplies quickly - The Equipment Management Department and requesting division sign confirmation about quantity and quality when supplies are received and replaced - The Equipment Administration Department will make a proposal for payment to pay for the relevant suppliers Currently, unit’s leaders are concerned about the effectiveness of internal control systems, and towards all three objectives simultaneously of COSO Require: Make a flowchart showing the control of the procurement activity mentioned above and present the control nodes in the process Try to design formats of documents related to the process Assess risks related to the procurement process Propose necessary control procedures to prevent above risks CASE 22 A company offers a monthly payment discount policy as follows: Monthly revenue 300 million: Receive a discount rate of 3% on total revenue The company has a regulation: the sales manager is the person who approves the discount rate for customer after the request from staff in charge in the department Staffs of sales department make the discount request based on the basis of revenue report of each customer provided by accounting department After receiving the approval from the sales manager, account receivable accountant is the person who directly makes discount documents at the end of the month Accounts receivable accountant is also responsible for monitoring revenue and cash in bank of the company Require: Assess the risks that may arise in the above situations Propose necessary control procedures to prevent above risks ... type of control: A Preventive control and preventive control B Detective control and preventive control C Detective control and detective control D Preventive control and corrective control An... which type of control A Detective control and detective control B Preventive control and detective control C Preventive control and Preventive control D Detective control and corrective control 28... evaluation of internal control: A The result of ongoing evaluation of internal control affects separate evaluation of internal control system B Separate evaluation of internal control are integrated