Question

select a corporation whose business processes you will be able to analyze. evaluate which tools you would use to analyze its business processes, indicating your rationale.

• On the other hand, resources, such as accountants, business analysts, and I/T specialists who rely on documentation tools, will need proper training on these tools. You have been given the responsibility of familiarizing your team with these tools. Evaluate which techniques, in terms of their appropriateness, you would use to get your team ready for its first assignment—the evaluation of a firm’s internal control structure.

Answer 1

For this case we would use a Dairy product manufacturing company.

Internal Control refers to the control which are introduced in the system/process to prevent, detect and correct any error or fraud that can be caused and harm the organisation. The internal control testing is know as compliance testing.

Unlike other check i.e. substantive testing the compliance testing, the system is checked and not the transactions. Because if there is any flaw in one transaction then there will be flaw in all transactions and whole processing and output would be unreliable.

The process of compliance testing is more of a subjective way in practical aspect, a broad steps for compliance testing are as follows,

1. Identifying the Business process - Generally the same will be identified by brain storming within engagement team, by interacting with the business management, discussing with the process personnel. For e.g. Buying milk, Processing, Selling,  Accounting, Hiring etc.

2. Risk Assessment - After finding all process, the threats & vulnerability are to be assessed. Threat represent external factor compromising the process. vulnerabilities represents internal weakness of the process. Then we assess the likelihood of event occurrence, where a external threat exploits the vulnerabilities. For e.g. buying milk with sub quality or sour milk.

3. Prioritizing- Once risk is identified for all all process, the process are to be prioritized based on the impact of an event being materialized.

4 Existing Control - In this stage existing current are checked, some steps are as follows,

a. Walk-through - Walk-through of all process as they are happening. It is more apt for physical process. for e.g. Buying milk

b. Dummy Transaction - In this stage, dummy transaction are introduced in the system to check and compare the actual output against expected output. For e.g. putting a payment transaction in the accounting software.

c. Interview - Taking interviews with personnel in the process to check ground reality, this people are in the middle hierarchy of the organisation For e.g. Interviewing HR manager to know about recruitment process.

d. Observation - The process are to be checked by observing personnel behavior. For e.g. to check for password sharing event, observe people live, watch CCTV footage etc to check the interaction

e. Questionnaire - this is used when the population to be check is wide. For e.g. Understanding payroll, by sending a questionnaire to all the employees of the organisation.

f. Documentation - the documentation refers to policy, procedures, manual etc of the organisation for e.g. Checking HR policy to check the process of hiring and avoid any conflict of interest.