Besmanos, Christine Claire D.

AC09301

Problem 6.1 Go-Go Corporation a. Go-Go s audit committee is consists of the corporate controller, treasurer, financial vice president, and the budget director. Sarbanes-Oxley Act of 2002 requires that audit committee must be on the company s board of directors and be independent of the company. I think Go-Go Corp did not adhere to this requirements because based from the findings the members of the audit committee is not independent of the company, therefore they cannot be relied to faithfully oversee the corporations internal control structure. b. The treasurer involves safeguarding the company s assets so there can be doubt whether the company s assets are really safe with their treasurer who is convicted of fraud several years ago. They should review their policies for employee personnel. c. This is a bad indication of the firm s attitude. They insist on doing things that they will do everything in order to make it happen even if it is unethical to do so. d. The internal auditors must be independent of the financial vice president because if they do report to him, the financial vice president can easily order them to manipulate the results of the audit findings. It would be better if the internal auditors would report to the audit committee instead. e. This not a good indication of the company s internal structure because there can be a possibility of a bias in the company s internal structure. f. This shows a weakness in the company s policy on monitoring performance. Employee and supervisor relationships affects judgments on subjective basis of evaluation so this may result to unfair evaluation then lead to unfair punishments and rewards. g. This is another evidence of the company s negative attitude towards accomplishing things their way. h. The manual is a helpful on-the-job reference for employees and a useful tool in training new employees. Go-Go Corp s manual does not fit these characteristics because their manual just discusses the treatment for dealing with employees, customers, vendors and employees. It should include explanation about proper business practices, description about knowledge and experience requirement for key personnel, policies on certain transactions, and documentation of the systems and procedures. i. This is just a preliminary assessment of the accounting system. For the succeeding check-up, testing the internal controls would be a more effective way for judging the systems. j. This issue involves proper data security procedures so the company should pay attention to this issue or else employees might be getting valuable data from them. Authority and responsibility must be included in the manual to serve as a provision for this instance. k. This is a good move of the company to enhance their data security projects. Extra care must be exercise to ensure that there is nothing fraudulent with the items listed on the budget. l. This is another evidence of the company s negative attitude towards accomplishing things their way. The manager has already explained to the management that the project cannot be finished on time but they are not willing to move the schedule. m. The company employee supervision does not seem to be attractive. The employees should have someone to discuss their issues with or else they might feel that they have no value and might result to fraudulent actions. Employee support and monitoring should be given attention. n. I don t think there is something wrong with the company s strategy in relation to its internal environment.

o. Management should include in their policy the extent of the relationship of the suppliers to the purchasing agents. This finding can be diagnosed as bribery which is unethical and might result to favoring suppliers with unreasonable cause. Problem 6.2 a. Preparation of paycheck and the recording of the time worked by employee are not properly segregated. b. The mail opening should be done with proper authority c. The preparation of invoice and check authorization should be segregated. d. A proper custody and separate recording of the items issued is necessary in this situation. e. Accounts receivable ledger recording and check custody should be separated. f. Segregation of the preparation of a customer receipt, and authorization of the credit should be implemented. Proper segregation of the employee belongings and the return bin should also be implemented. g. Purchase orders should not include confidential information about its contents such as the value and quantity of the shipment. CCTV cameras could be used to avoid these incidents of employee theft. h. The duty of check signing, invoice preparation and vendor approval should be separated. There should also be a separate control for the modification of master files like the vendor master file. i. Recording invoices, vendor master file modification and payment authorization should be independent. j. Cahiers should not have the authority regarding purchase return vouchers. k. Vendor approval and modification of the employee master file should be separated.