Name: DE VERA, Kyle C.

Section: BSA-3A
Date: May 31, 2021 Score

Finance and Accounting Operations Audit:

ABC Corporation is a newly registered Company. The company was blessed from being a sole proprietor to
corporation. However, the transition was not easy because setting up a corporation entails a lot of process to do.
Coming from an entrepreneur set up where everything was fast pace, the President find it hard to cope up so he
started to get people that will help him to manage the affairs of his Company.
To start with, he wanted to streamline the finance and accounting department. This is the current process of the
department:
The Company process the check vouchers without purchase orders. Since there was no purchasing department, all
requests go directly to the president for approval. However, if the requests amount to Php50,000 these can be
facilitated for procurement.
Petty Cash replenishments and liquidations were not religiously followed thus piling up for 3 to 6 months.
The president was puzzled for poor performance of the company considering they have a lot of purchases within the
three months period (January to March) only to find out that billing invoices were not timely recorded. Billing invoices
were recorded upon receipt of cash and at the same time the VAT component was not recognize.

Instruction:
You are hired as an operations auditor and the first task handed over to you is to audit the finance and accounting
department. Prepare the Control Objectives, Risk and Issues noted, and recommendation if any.
If you will prepare the ideal business process as part of the recommendation what would it be?

Control Objectives
a) To ensure that all procurements/purchases has the appropriate documents before processing the orders
and be approved by the president.
b) To ensure that all purchases are procured properly using a standardized expenditure process.
c) To ensure that all payments are recorded properly be it the time or the amount of the purchase in the
system.
d) To ensure that payments done through the use of petty cash fund are done properly and are properly
replenished and liquidated on time.
e) To ensure that all invoices are paid and the income is correctly identified and accounted for and reflected in
the accounts.
f) To ensure that the prevailing sales tax or VAT regulations are correctly complied with.
g) To prevent the possibility that staffs and suppliers are doing fraudulent activities or are doing malpractice.

Risk and Issues Noted

Key Issues
 1.1. How does management ensure that only valid invoices are paid where the goods and services
have been correctly and fully received?
1.2. Are all the invoices are properly authorized and confirmed and are these invoices according to the
budget?
1.3. How does the management ensure that all VAT components are properly recognized?
1.4. What processes ensure that the values of paid accounts and outstanding invoice liabilities are
accurately and completely reflected in the accounting system?
1.5. How does the management ensure that the receipt of cash are computed properly and thereby
applied the proper VAT component.
Detailed Issues
2.1 Is the organization adequately protected from the payment of invalid or fraudulent invoices?
2.2 What would prevent staff from introducing false invoices into the system and these subsequently
being paid?
2.3 Are all invoices identified, recorded, trailed and accounted for?
2.4 How does management ensure that the goods and services being charged for have actually been
fully received?
2.5 What prevents payment of invoices where the goods were returned or proved to be unsatisfactory?

Recommendations
a) The management must prepare a standardized process on procurement of goods and services.
b) The management should replenish and liquidate the petty cash funds properly and timely.
c) The management must ensure that all disbursements and receipts are properly record and are timely
recorded in the accounting system.
d) The management must ensure that the amounts being recorded must be computed properly and all
components must be applied before recording it in the accounting system.