Kamid, Al-jubair A.

BSA 4C
January 12, 2022 Operations Auditing

Midterm Quiz

1. Cash collections are deposited on a weekly basis.

a. It is recommended that cash collections should be made daily. It should be taken
into account such as cheques, and/or cash are vulnerable in a way that it can be
damaged, lost or even steal by someone. In having daily cash collection, it can be
seen as a good practice as it portrays that the management is efficient in depositing
and keeping their cash flow schedule correctly.
b. Checking the cash collections through a sheet. It is recommended for a company to
verify and check the cash receipts or the cash inflow balances. Since cash is the
mainstream of having a business, it is to note that getting shortages is an alarming
stage reason why there should be a sheet wherein it does show the current balances or
deposits. Lastly, having this kind of strategy would most likely avoid the potential
risk in handling cash collection as it mitigates the unreported borrowing of any
collections held by the collector.
2. The other accounting staff reconciles receipts with cash remittances and deposits cash
collections.
a. Segregation of duties must be implemented. When there is only one staff handling
the reconciliation especially the cash remittances and deposits, it is safe for the
company to be skeptic. There should be another person assigned for remittances,
deposits cash collections and the person who is handling the reconciliation. In this
way the staff could not easily manipulate the results, and thus unprecedented
occurrence of stealing, borrowing or any acts that would affect the company would
likely to be mitigated.
b. Verifying of reconciliation should be made randomly. If worst case scenario, if
there is only one staff that handles the reconciliation, and the deposits, there should be
another person that is independent on the staff that could check and verify if the
reconciliation has been made correctly. In this strategy, the staff could maintain its
 integrity as there would be another person who would check its work to see if it will
correspond on the book.
3. Sales prices can be updated by any members of the team.
a. Sales prices must be restricted to authorized personnel only. Having the freedom
by any members of the team to change prices would likely lead to chaos,
misunderstanding in the organization. Accountability would most likely be nothing
because it is untraceable as all members are allowed to change the prices. By limiting the
number of people who can access the sales prices, it is safe to say that it is easier for the
company to locate whose fault if there are, and also, it can be tracked easily who changed
the sales prices.
b. If the company has decided that any members of the team can change the sales prices,
what could be recommended is to put different passcodes for every member. In this
way, the company has the authentication code of who was the last person that changed
the prices. For every member, there should be a unique passcode in order to know who
updated the sales prices. Thus, in this strategy, the company can monitor in the system
who is responsible for it.
4. Inventories are not properly reconciled.
a. There should be a periodic inventory system. In this kind of system, physical
counts are held depending on what is decided (whether annually, quarterly, monthly). Physical
count is really helpful when things in the cloud system is not right. There should also be a
random physical count to avoid the stealing in a company as if it is scheduled, there are chances
that others might plan their way on mitigating it. However, if there are intervals in which the
physical counting is unknown, it is likely to say that stealing can be avoided.
b. The records must also be compared to the physical count. Having the computer-
based inventory system is not reliable at most since people might misappropriate the figures
being encoded in the system. However, when physical count and the records are compared, there
is a less chance of getting unreconciled inventories. Thus, this should be made as much as
possible just like in scheduling the physical counting because this can help the company update
their number of stocks or inventories in an accurate manner.
 5. The receiving clerk who receives the items is the same clerk who updates the Inventory
……..Subsidiary Ledger and General Ledger.
a. Segregation of duties must be implemented. Having this kind of setup wherein the
clerk is the one who receives and updates the ledger is very risky. There should be another
person who will handle the updates of the inventory subsidiary ledger and the general ledger to
the person who will receive the items. In this way, the potential of manipulation of the records
can be mitigated.
b. When the company has no capacity to hire another employee, making sure that
accountability should be set above par. When there is no other way, making sure that there is a
higher sanction for the person that can commit any malicious acts in a company. Also, if there is
only one employee being hired, it is to be noted as well that the background checking must be
conducted thoroughly in order for the company to assure the safeguarding of its assets. Lastly, in
order for this to work, there will also be an auditor who will check these things randomly, in that
way, there could also be a verification to trace if there are things that are not right.