Question

Identify three control weaknesses you observed in the Netsuite demo company and three good controls that are present in the Netsuite demo company. (these can be from Sales or Purchases). Explain why they are weaknesses (do they lead to errors in input, incomplete input, invalid input, inefficiency, or ineffectiveness or a lack of segregation of duties).

Answer 1

Three control weaknesses in Net suite:- 1. In the area of purchases, while processing an invoice, if suppose a duplicate invoice which is already processed with the same number, the system just shows a warning message but does not prevent from processing the invoice since the same has already been processed. This can lead to invoice processor processing the invoice again and which may lead to duplicate payments. This leads to invalid input.

2. A person while creating a Goods receipt note, there is no independent person who is approving that the goods has been received and properly checked. The requesting person for goods himself creates a Goods receipt note which may lead to collusion with vendor and he may raise a goods receipt even if the goods are not received. This is due to lack of segregation of duties.

3. While processing the payment, the system is not linked to the bank account so that basis the payment entry, the person should download the file and upload to the bank portal again leading to the risk of editing the file before uploading to bank portal. Most of the systems provide the facility of automatic upload from system to bank portal but not with the system in the question.

Control Strengths

1. An Invoice has to be definitely linked with purchase order. Without an authorized purchase order in the system, an Invoice can not be accounted and paid. This is a very good control which prevents from misuse of  funds

2. Invoice processing function and payments function accesses are segregated that not a same person who processes the invoice can process payments also. This ensures that fake payments or illegitimate early payments may not made with collusion of vendor

3. With out a Purchase order and invoice processed the system does not allow to process payment. This is good control to ensure that a company has actually received the good or service before payment to the vendor.