Question

Discussion of Internal Control always start with cash. Why do you think that is the first focus of internal control?

What would you look for to identify an employee in triangle of fraud?

Is Internal Control more or less difficult at a smaller company? Why?

Answer 1

Internal control system means measures taken for achievement of organisational objective in efficient and effective manner.
It is put in place to safeguard assets, stop fraudulent activity and increase efficiency.

1.

The internal control are placed at cash in the beginning because cash is an current asset in liquid form easily available to employees, management. It carries high risk of misappropriation as it an item with high risk.

where the duties are not segregated, proper books of accounts are not maintained, cash sales are made ,voucher or reception not available the cash defecation are highest in these circumstances.

2.

The auditor try to find out audit risks at the place where the employees are interdependent on each other for making any transaction success useful if they all come up together break the rules and internal controls to commit misappropriation and fraud there is a fraud triangle is formed.

The auditor has to carefully form and audit procedure to identify fraud Triangle, he has to do an risk assessment of such areas before initiating audit.

3.

The internal controls are difficult to be adopted and maintained in small companies because of various reasons such as

1. lack of segregation of duties : the number of employees are very less in small companies so a single employee has to perform more than one task so it is it will be easy for him to commit fraud.
2. user access to information system : all the employees has access to the information systems there are few employees and they can easily manipulate company data for committing fraud