Sales & Receivables

Receive order from Dispatch goods to Invoice to customer Receive cash and
customer customer manage receivables
Segregation of GDNs numbered Sales invoice linked Credit notes
duties sequentially, GDN and SO sequentially numbered
and authorized.
Credit limit checks GDN signed by Sales invoice is
authorized staff sequentially Regular statements
New customers are numbered sent to customers.
authorized Customers signs
delivery note Segregation of Control account
Sequentially- duties reconciliations on
numbered orders trade receivables.

Bad debts must be

authorized.

Identification and
follow-up of overdue
accounts
 Purchases & Payables
Place order to Receive goods from Receive invoice Manage payables
vendor customer
Segregation of Copy of delivery Invoices checked Regular statements
duties. notes retained against PO and GRN received from
suppliers
Purchase orders are GRNs produced Discounts checked
sequentially Regular control
numbered. Segregation of account re
duties conciliations
All orders placed
only with suppliers Pre-numbered debit
on an approved list. notes

Orders signed by
authorized staff

Competitive tenders
obtained.
 Payroll
Employee Calculating Calculation of Recording The payment of
induction into gross wages tax and other wages and wages and
payroll and salaries deductions salaries salaries.
payable in the
accounts
Formal Segregation of Automated Payroll entries Paid by
authorization duties payroll approved automated bank
of new procedures for transfer
employees Gross pay deductions Payroll control
authorized by accounts List of payments
Formal appropriate Senior manager reconciled to authorized
personnel person. review individual
records, giving employees. Formal timetable
details of each Time sheets Voluntary for payment of
employee deductions deductions.
Executive authorized by
Data file review of Employee Bank statements
controls monthly payroll check

Bonus payment
is authorized
 Cash & Bank
Money received is Money received is Money is properly All payments are
recorded banked safeguarded properly authorized
Segregation of Daily banking Procedures for Payment
duties opening new bank authorization matrix
Recon of cash accounts.
Listing of all money receipts and banked Cancellation of
received. amount. Restricted number of documentation once
employees cheques has been
Cash tills used to authorized to receive prepared.
record cash sales. or access cash.

Sequentially Restrictions on
numbered receipts individuals
given for cash authorized to prepare
receipts. and hold cheques.

Safe custody of
cheque books.

Cash should be kept

in a secure place
 Inventory
Inventory records Inventory may be Inventory may be Appropriate levels
are inaccurate stolen or damaged valued at incorrect of inventory are not
amounts held
Segregation of Restricted access to NRV computation Maximum and
duties storage areas procedures minimum inventory
levels
Goods received and Regular inventory Procedures for
issued are checked counts. identifying obsolete Appropriate re-
and order levels and re-
Proper slow moving order
documentation of inventory items. quantities.
inventory receipt &
issuance.
 Fixed Assets / Non-current
Assets System
• Documentation and analysis should be produced to support (capital) expenditure
requests.

• Approval procedures for the payment of invoices to the suppliers

• Management should review the analysis of purchased items as capital or revenue

items

• Use of authorized capital expenditure budgets and project evaluation techniques, if

appropriate.

• Use of a non-current asset register, that is regularly checked and reconciled to the
non-current asset accounts in the main ledger.

• Impairment reviews are performed as necessary.

 W13 A4
Following control weakness may have enabled the perpetration of this fraud.

1. Lack of segregation of duties

2. No policy / system for declaration of conflict of interest by employees.

3. Inadequate background checks and weak controls over induction of suppliers.

4. General ethics situation of the organization is weak. This is usually caused by an

ineffective employee hiring process, inadequate ethical trainings and lack of
whistle blowing & fraud reporting mechanisms.

5. Stock is verified by store keeper. No independent stock inspection when it is

received in the store.

6. No independent periodic physical verification of stock to identify damages.

7. No standard costing over benchmark levels of stock consumption.

8. Inadequate controls over inventory levels to be maintained.

 S14 A6
Cash donations
• Statement of cash donations is reviewed by management and exceptions are
inquired.
• Pre-numbered cash receipt vouchers are used.
• List of receipt vouchers and actual cash deposits are reconciled.
• Donation boxes are kept locked and opened only in presence of 2-3 persons.
• CCTV surveillance in areas where cash donations are received / kept.
• Cash is deposited with bank at day end.
• Independent cash count
• Person receiving the cash, maintaining its custody and recording the transactions is
not the same

Bank Donations
• Statement of bank donations is reviewed by management and exceptions are
inquired.
• Bank reconciliation statements are prepared and reconciling items are investigated.
• Cheque books and other bank documents are maintained in safe custody.
• Separate persons prepare and review bank records.
• Authorization matrix for signatories is implemented.
 S14 A6
Token Fee
• Statement of token fee is reviewed by management and exceptions are inquired.
• Triplicate pre-numbered fee vouchers are used and are cross signed by students.
• Student-wise fee report is reconciled with actual student count
• Cash received is kept in lock and deposited at day end.
• Separate individuals receive fee, issue receipt and perform reconciliation.

Teacher Payments
• Statement of payments is reviewed by management and exceptions are inquired.
• Centralized payroll database is maintained.
• Payroll is updated only based on CNIC & CV verification (ghost employee risk)
• Changes to master data is made by the HR department only
• Attendance record is reconciled with salary file.
• Month-to-month payroll is analytically reviewed.

Petty Cash Payments

• Statement of Petty Cash is reviewed by management and exceptions are inquired.
• Pre-numbered petty cash vouchers are used.
• Policy is developed for petty cash eligible payments and limitations.
• Petty cash is kept is safe custody.
• Surprise cash counts are conducted by independent persons.
• Payments recorded in GL only after original receipts are reviewed and reconciled.
 S16 A7b
Issue Implication
Journal vouchers were • There is a risk that all JVs may not
not pre-numbered have been posted in the GL.
There was no mechanism • Transparency of deals by dealers
for recording the phone cannot be ensured.
lines of equity traders • There is no recourse incase of a
dispute.
Margin requirements for • In case of any default by customer
certain individual clients or crash of market, company will
is below the normal be required to bear the losses.
margin requirements • Excess financial charges or margin
requirements are to be borne by
the company.
• Maintaining margin requirements
below the prescribed limits may
attract legal implications.
Recommendation
• Use pre-numbered JVs
• Review completeness of JVs
already recorded
• Establish mechanism for
recording calls
• Establish a team to audit /
review the calls on sample
basis.
• Prepare and implement a
consistent policy for margin
requirements.
• Communicate the policy to
all staff & clients and ensure
compliance.
• Take strict disciplinary action
in case staff deviate from
policy without appropriate
approvals.