MKC Manufacturing Corporation

Summary of Audit Findings

1 People 3 Technology

2 Policy 4 Process

LEGEND: - HIGH RISK

- MEDIUM RISK
- LOW RISK
 People Issues
1 Incomplete Accounts Payable Aging Report
Risk: 
Lack of manpower may lead to deliveries might not be properly checked because the employees
might get overwhelmed with the number of deliveries they need to account for. Moreover,
2 employees could either get confused with the tasks on hand due to overlapping of duties. Lastly, it
would be an opportunity for employee collusion.

Recommendation: 
3 You should consider hiring more employees for the proper division of workloads. Also, we encourage
you to apply separation of duties by establishing another department solely for receiving goods
department. Lastly, encourage training for competency of personnel for specific for relevant task. 

4
LEGEND: - HIGH RISK
- MEDIUM RISK
- LOW RISK
 Policy Issues
Incomplete Accounts Payable Aging Report Lack of monitoring (Accounts Payable Aging
1 Report)
Risk: Risk:
This could lead to interest payment. This results in interests to accrue, civil cases may
2 Recommendation:
arise in court and timing differences.

You might want to think about increasing the Recommendation:

possibility of automating AP aging analysis. To avoid overdue payables, your Accounts Payable
department should check and pay suppliers on a
3 regular basis rather than on a monthly basis. You
should also consider implementing a notification
system for any accounts that are approaching their
due date.

4
LEGEND: - HIGH RISK
- MEDIUM RISK
- LOW RISK
Technology Issues
Unauthorized personnel can access, edit, Improvement opportunity in merging ZAP
1 enter, and modify entries in the accounting and COUPA into one system.
system.
Risk: Inappropriate access may lead to confidential Risk: Employees using two systems may lead to
2 data being leaked which can be detrimental to the
company. Moreover, files may be deleted without
confusions that can result in delays on liquidating
payables.
back-up.

Recommendation: Consider implementing a role- Recommendation:  This is a good improvement

3 based access matrix to assure appropriate system
access, upgrading system defenses, assigning
opportunity to Integrate and upgrade the systems
to avoid confusion and possible loss of data
authorized individuals to oversee system security to
avoid prospective hackers, and regularly backing up
files.
4
LEGEND: - HIGH RISK
- MEDIUM RISK
- LOW RISK
 Processes Issues
1 Using a photocopy of purchase order
(PO) instead of a blind copy
Risk: Receiving clerks may be tempted not to
verify the quantity and condition of the goods
2 and will end up with incorrect numbers of
orders received. Also, there is a chance of screenshot here
having the photocopied Purchase Order (PO) is
unclear and will lead to the receiving clerk’s
confusion.
3
Recommendation: Think about using a blind
copy of Purchase Order for effective and
efficient transactions.
4
LEGEND: - HIGH RISK
- MEDIUM RISK
- LOW RISK
 Processes Issues
1 Ineffective performance of 3-way matching Absence of Service Level Agreement with
suppliers

Risk: This could lead to inaccurate specifications or Risk: In the absence of a service level agreement
2 quantity of goods or inventories with suppliers, deliveries may be delayed, affecting
production.
Recommendation: Consider making it a policy to
only use blind copies of POs. Recommendation:  Consider appointing someone
from the receiving department to track down the
3 orders and make sure they arrive on time. Also, to
avoid stock out costs, consider establishing a
reorder point.

4
LEGEND: - HIGH RISK
- MEDIUM RISK
- LOW RISK
 Processes Issues
1 Issue: Inappropriate classification of
fixed asset and inventory (High Risk)
Risk: The asset might be classified incorrectly
2 and it might be the main cause why fixed
assets are missing. screenshot here

Recommendation: Set strict criteria on how to

3 classify assets accordingly to avoid this kind of
errors

4
LEGEND: - HIGH RISK
- MEDIUM RISK
- LOW RISK
 Processes Issues
1 Overstated Depreciation
Risk: There might be an impact on your
financial statement, particularly on the income
2 statement.

Recommendation: We recommend that you

set policy that your financial statements are
3 being thoroughly reviewed by your accountant
before its further issuance.

4
LEGEND: - HIGH RISK
- MEDIUM RISK
- LOW RISK
THANK YOU FOR LISTENING! 