1.

UTICA LIGHTING COMPANY(CENTRALIZED SYSTEM WITH DISTRIBUTED

TERMINALS)
c. Describe the internal control weaknesses.

1. No supervision for timekeeping before sending the time tickets to the cost accounting
department.
2. Lack in segregation of duties between RM record keeping and physical custody activities.
The storekeeper is also updating the raw material inventory records. GL function is not
separated from inventory control.
3. No direct access control as vendors deliver raw material inventories directly to the
storeroom. There is also lack in indirect access control as work center supervisor accesses work
order document.
4. Involvement of unnecessary authority as the supervisor is involving in tasks such as
preparing additional materials requisitions.

2. EXCELSIOR LAWN FURNITURE(MANUAL SYSTEM WITH STAND-ALONE PC

SUPPORT)
c. Analyse the physical internal control weaknesses in the system.

1. No segregation of duty between record keeping and asset custody activities. The
maintenance of accounting records for RM inventory is not separated from the materials
storeroom function.
2. No independent verification procedures undertaken when posting to general ledger. The total
movement of products from WIP to FG is not checked by reconciling journal vouchers with
summaries of the inventory subsidiary ledger.
3. Lack in direct access control as there is no limit to physical access to excess RM stock which
are kept in the work center for future production.
4. Incomplete accounting records as the FG inventory file is absent.
5. Involvement of unnecessary authority as the supervisor is participating in the production
process.
6. No transaction authorization in the form of excess material requisition to release additional
raw material.
PROBLEM 4 - INTERNAL CONTROL

1. No transaction authorization done to journal vouchers by a responsible manager before

posting to general ledger which will lead to incorrect GL account balances.
2. No segregation of duty as the task of updating the general ledger and preparing journal
vouchers are done by the same person.

The main control weakness for the Ram System Company is that the accounting clerk is
updating the general ledger accounts and also has asset custody.

This is a problem because there is no segregation of duties. Essentially, there should be

more than one person doing all these tasks so there is a lesser chance of fraud.

The accounting clerk shouldn’t be receiving documents, preparing journal vouchers,

posting to the general ledger and also reconciling the sub-ledger accounts.

In addition, there is also a high change for error since there is nobody double-checking
the clerk’s work.

There needs to be somebody checking the work that the clerk is doing to make sure there
are no mistakes.