MI

DTERM EXAMI
NATI
ON
Jenni
ferAnt
ia
RevenueandRecei
ptCycl
e

RI
SK1

RI
SK2

RI
SK3

RI
SK4

RI
SK5

RI
SK6
Expendi
tur
eandDi
sbur
sementCycl
e

RI
SK1

RI
SK2
HumanResour
cesandPayr
oll
Cycl
e

HumanResour
cesManagementPr
ocess

Payr
oll
Cycl
e

RI
SK1

RI
SK2

RI
SK3

RI
SK4
Pr
oduct
ion/Conver
sionCycl
e

RI
SK1
Fi
nanceandI
nvest
mentCycl
e
I
denti
fi
edRi
sks(TestofCont
rol
s/Det
ail
s)and
Recommendati
ontoavoidRi
sks

RevenueandRecei
ptCycl
eRi
sks
CreditAppr
oval–theremightbeanunaut horizedappr
ovalofcr
edit
s.I
ntegr
it
yofthe
personnelassi
gned i
n approving and checking t
he cr
edit
sisneeded and t
here
shouldbeasegregati
onofdutiestopreventsuchunauthori
zedappr
oval.

Bil
li
ng–Bill
i
ngt omult
ipl
ecomponent soraservicethatmustbeincl
udedinasingle
fee,bi
ll
i
ng forservi
ces notr ender
ed,and doubl e bil
li
ng r
esul
ti
ng i
n dupl
icate
paymentmighthappen.Tolessentheseri
sks,t
her eshouldbeasupervi
sor
yreview,
andsegregati
onofduti
esofthepersonnel
withintegri
ty.

Recor ding – Accur ate document at

ion off i
nancialtransacti
ons and r ecords i s
i
mpor tantinr ecording.Ther emi ghtbear ecording ofnon- existentexpendi ture,
over pri
cingofser vicesr endered,overstati
ngr evenue,orest ablishmentofasl ush
fundswhi char edi
fficultt
odet ect
.Tomi t
igatesuchr iskthecompanyshoul dputan
exper tt oreview the r ecordsand puta per sonnelwi thintegr i
tyt or ecordsal l
transactionsaccur atelyand f ai
rl
yi nreasonabl e detai
land suppor ted byor iginal
document ati
onandr ecordont i
meandi nchr onologicalorder.Theof fi
cialbookof
thecompanymustbepr otectedtopr eventintenti
onaloruni ntenti
onaldest ruction,
i
mpr operorunaut hor i
zedal t
erat
ions,ordi sclosure.Inaddition,dut iesshoul dbe
separ atedtoensur et hatnooneempl oyeehasr esponsibi
li
tyformor ethanonest ep
i
nat ransacti
on.

CashCollecti
on– separ
ati
onofcashhandl
ing dut
ies(
recei
ving,deposi
ti
ng,and
r
econcil
i
ng)mustbei mplement
edtomini
mizetheopportuni
tyforanemployeeto
misappr
opriat
efunds.

SalesRet urnsandAl l
owances–Tol essentheri
sksinsalesret
urnsandal l
owances,
certai
ndesi gnatedindivi
dualswithi
nthecompanyshoul dbeassi gnedtheauthori
ty
todevelopsal esreturnpoli
cies,aut
hori
zesalesret
urns,andapprovedcreditmemo.
Andf oranef fecti
vesystem ofinter
nalcont
rolonsalesret
urnsandallowancesthere
shouldbesegr egati
ononi ndivi
dual
swithauthor
it
ati
vedutiesfr
om thoseresponsi
ble
forrecordingandcust ody.

Uncoll
ectibl
e Accounts– uncol l
ecti
ble accountsare debt sthathave vi rtual
lyno
chance ofbei ng paid.An accountmay be uncol l
ect i
ble because ofdebt or
’s
bankruptcy,theinabil
i
tytofindthedebt or,refusaltopaybyt hedebt or
,t here’
sa
fr
audonpar toft
hedebt or
,orlackofpr operdocument ationt oprovet hatdebtexists.
Compani escanreduceuncol l
ecti
bleaccount sbyofferi
ngcr edi
tonl ytothosecr edi
t-
worthycustomer s.Thiswil
lbeaccompl ishedbycont acti
ngbusi nessest hathave
hadpr evi
ousexper i
encewi t
hthecust omerbef oreappr ovingthecr edi
tsoft hesaid
cust
omer .
Expendi
tur
eandDi
sbur
sementCycl
eRi
sks
PurchasingandRecei ving– Fr aud,cost,quali
tyanddel i
veryrisksarepr esentin
purchasingapr oduct .I
nmi ni
mizingtheseri
sks,thecompanyshoul densurethatthe
suppli
ers electedhast heabi l
it
yt odoi t
sr esponsibil
i
tyasasuppl i
erandt hatthe
companyi tsel
fwi llbesat isfi
edwi t
ht heproductt hey’repurchasing.Thecompany
shouldalsosegr egatedut i
esofi tsemployeesaut hori
zedinrequesti npurchaseofa
product,pur chaseappr oval,purchaserecording(cashori ncredit),pur
chaseor der
,
recei
vingt hegoods,andr ecordingthegoodsr eceivedtopr eventpurchasingand
recei
vingapr oductt hatdoesnotexi st.Ati
mel ysupervisi
onalsoisr equi
red.

CashDi sbursement– Segr egatedut ies.Thedut i

esofaut hori
zati
on,custodyand
recordkeeping shoul d be separ ated so t hatone i ndivi
dualcannotcompl et
ea
transacti
onf r
om starttofi
nish.Revi ew aut horizedsi gnors.Carefull
yconsiderwho
youraut horizedsignorsare.Thosei ndividualsshoul dnothaveaccesst ot heblank
checkst ocknort he abi
li
tyto ent ert he transaction intothe accounti
ng system.
Consi derrequi r
ingdualsignatur es.Remembert hewi ret r
ansfers.Reconcil
ebank
account sinat i
melymanner .Thebankr econcili
ationshoul d becompl eted ina
ti
mel ymannerbysomeonewhoi sindependentoft hecashdi sbursementpr ocess.
These cont rolsshould be impl ement ed tor educed r isksoft heftand disbursi
ng
moneyf ortheper sonaluseoft heempl oyeeassi gned.

HumanResour
cesandPayr
oll
Cycl
eRi
sks
Update Payr ol
lMast erData– I n updating the payr olldata,t here mi
ghtbe
unauthori
zedchangest opayrol
lmast erdataandi naccurateupdat i
ngofmast erdat
a
mighthappen.
Forthecompanyt opreventtheunaut hori
zedchangest opayr ol
lmast
erdata
ther
eshoul dbeanaccesscont rolsandsegr egat i
onofdut i
eswher ei
noneshould
approvedt heupdate,onewouldupdat eandonewi l
lconfir
mt heupdat ehappened
ofpayroll
mast erdataandnootherper sonnelcanaccesst hesaiddat a.
I
naccurateupdateofdatacanbepr eventedi fthehumanr esourcewouldhir
e
employeest hathaveint
egr
it
yinpr ocessingthedat a.

Vali
date Ti
me and At
tendance Data – There mightbe an inaccurat
etime and
att
endancedata.Tocontrolt
hisinaccur
acyt hesupervisorshoul
dr evi
ew t
hetime
sheetsoft heempl
oyeesand make sur et hatthe source ofdataautomati
on i
s
accurat
e.

PreparePayrol
l–Err
orsi
nprocessi
ngpayr
oll
mayoccur
.Andt
olessent
heseerr
ors,
supervi
sor
yr evi
ew i
sneededandtheint
egri
tyoft
heonewhoprocessthedat
ain
prepari
ngthepayrol
li
smandator
y.

DisbursePayrollandPayr ol
lTaxes–Thef torfraudulentdist
ri
butionofpaychecks,
fai
lur
et omaker equiredpayment s,untimelypayment sandi naccuratepayment s
mayoccur .
Rest
ri
ction ofaccesst o bl
ank payr ollchecksshoul d be i mplemented t
o
preventthetheftorfr
audulentdi
str
ibutionofpaychecks.Forf ai
luretomaker equir
ed
payment sandunt i
melypayment sofpayr oll
,aconf i
guresystem isneededt omake
automaticpayment sont i
me.Andi ni naccur
atepaymentofpayr olls,i
ntegr
it
yofthe
personneli
smandat oryandt i
melyr evi
ewofsuper vi
sor sisneeded.

Pr
oduct
ion/Conver
sionCycl
eRi
sks
StockandDel iver
yt oCustomer-I naccur at
eFor ecasti
ng.Or der i
ngandsel li
ngthe
ri
ghtinventorystock,intheri
ghtamount s,attheverytimeyourcust omer sdemandi t.
Under esti
mating demand canr esul tin stockout s,lostsalesand pot ential
lyl
ost
customer s,whi l
e overest
imat i
ng mayl eave you with excessst ockt hatt i
esup
cashfl
ow and i satr i
sk ofwas te.Unr eli
able Suppli
ers.St ock r i
sksi nclude the
reli
abi
lit
yofasuppl i
ertodelivertot heagr eedl eadti
meandadher et ost ockqualit
y
andquant i
ti
es.Thei mpactofunder performing suppli
ersthr oughf ailuret omeet
deli
veryschedul esorqual it
yst andar dscanr esultinproduct iondel ays,i nvent
ory
stockouts and customerdi ssatisfaction.The company shoul d ensure pur chase
orderscl ear
lyspeci f
yt he exactdel i
verydat e expected foreach i tem.Suppl i
er
cont ract sshoul dcl ear lydet ailhow t hesuppl i
erwi llbehel daccount abl ef orlateor
i
naccur atedel iveri
es.Shel fLi fe.Per ishablegoodsandpr oduct swi t
hashel flif
epose
anot herr iskt oi nvent or ycont r
ol,t heshor t
erapr oduct ’
sshel flif
et hegr eatert he
i
nvent or yr i
sk.Whol esal ersandr etailersshouldadoptami nimalst ocki ngappr oach,
especi all
yr egar dingper i
shabl ei tems.St ockmoni tori
ngandr otationhel pst ocl ear
olderst ock bef orei texpi res,and r otati
ng spotchecks shoul d be f requent ly
under t
akenf ort opsel lers,per i
shabl esandexpensi vei tems.Thef t.Thecompany
shoul densur est hati nvent oryi sfrequent l
ycheckedf oraccur acymaki ngi seasi erto
spott hef tbecausedi screpanci esar ei denti
fi
edsoonerr athert hanl ater.Ret ail
er s
cani mpl ementdi fferentcont r
olmeasur essuchassel f-alarmingant i
thef ttagst hat
soundsanal ar m whenashopl i
fterat temptstor emovei tfrom thest oreorel ectronic
cashr egi stert ransact ionst hatpr eventempl oyeesf rom r i
ngingupgoodsf orl ess
thant hei ract ualcost .Damage.Damagegener all
yoccur sdur ingnor malbus i
ness
oper ationsandcer tai ni ndust r
ieswi llhaveahi gherr i
skofdamaget hanot her s.
Damagedi nvent oryst ockt hatcannotbeusedbecomeswast eandi ncr easescost s
tot he busi ness.I ndust ri
eswi tht he r i
skofhi gh damage need i nvent orycont rol
poli
ci esi npl acet omi nimi zedamage.