Sports World Sdn Bhd is a leading sports and outdoor equipment retailer that sells various equipment,...

  

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Sports World Sdn Bhd is a leading sports and outdoor equipment retailer that sells various equipment, apparels and other related products all over Malaysia. You have successfully been employed by Sports World Sdn Bhd and assigned to evaluate its transaction processes, risks and internal controls. The purchase process begins when purchasing clerk, Alex, checks the inventory subsidiary ledger on his computer terminal each morning. When an item reaches its reorder level, Alex selects a vendor from the valid vendor file and prepares a digital purchase order (PO). He then prints two hard copies; one copy is sent to the vendor, and the other is filed in the department. Digital purchase order record is added to the PO File. When the goods arrive in the receiving department, the receiving clerk, Nabil, inspects them and reconciles the items against the information in the digital PO and the packing slip. He then manually prepares two hard copies of the receiving report. One of these copies accompanies the goods to the inventory warehouse, where Nabil shelves the goods and updates the inventory subsidiary ledger from his terminal. After that, he files the receiving report in the department. The other copy of the receiving report is sent to the Accounts Payable (AP) department, where the AP clerk, Sumayyah, files it until the supplier's invoice arrives. When she receives the invoice, she pulls the receiving report from the temporary file, prints a hard copy of the digital PO, and reconciles the three documents. At this time, Sumayyah updates the digital AP subsidiary ledger, the AP control account, and the inventory control account in the General Ledger from her terminal. Sumayyah then sends the invoice, receiving report, and the purchase order copy to the cash disbursements department. Upon receipt of the documents from AP department, the cash disbursements clerk, Ilyas, files the documents until their payment due date arrives. On the due date, he prepares a check for the invoiced amount, which is sent to the treasurer who signs it and mails the check to the vendor. Ilyas then updates the check register, AP subsidiary ledger, and the AP control account from his terminal. Finally, he files the invoice, purchase order copy, receiving report, and check copy in the department. Each day, employees of Sports World Sdn Bhd record their hours worked on timecards, which are reviewed by supervisors for correctness and submit to the payroll department at the end of each week. Using a terminal connected to the central payroll system, which is located in the data processing department, the payroll clerk, Emma, inputs the timecard data, prints hard copies of the paychecks, print two copies of the payroll register, and posts to digital employee records. Emma files the timecards in the payroll department and sends the employee paychecks to the various supervisors for review and distribution to their respective department employees. She then sends one copy of the payroll register to the AP department, and files the other with the timecards in the payroll department. The AP department clerk, Sumayyah, reviews the payroll register and manually prepares a disbursement voucher. She sends the voucher and the payroll register to the general ledger department. Sumayyah then writes a check for the entire payroll and deposit it in the imprest account at the bank. Finally, Salleh files a copy of the check in the AP department. Once the general ledger clerk, Mohan, receives the voucher and payroll register, he posts to the general ledger from the department terminal and files the voucher and payroll register in the department. Required: a) List FIVE (5) internal control components described in the COSO framework. (5 marks) b) Based on the case above, identify and briefly describe FIVE (5) internal control weaknesses associated with these systems as how they are currently designed. (10 marks) c) Based on your findings in (b), suggest relevant internal control practices to mitigate the associated risks. (10 marks) Prepare your answer for the (b) and (c) in a two-column table as shown: a) Internal control weaknesses b) Suggested internal control Your answer Your answer Sports World Sdn Bhd is a leading sports and outdoor equipment retailer that sells various equipment, apparels and other related products all over Malaysia. You have successfully been employed by Sports World Sdn Bhd and assigned to evaluate its transaction processes, risks and internal controls. The purchase process begins when purchasing clerk, Alex, checks the inventory subsidiary ledger on his computer terminal each morning. When an item reaches its reorder level, Alex selects a vendor from the valid vendor file and prepares a digital purchase order (PO). He then prints two hard copies; one copy is sent to the vendor, and the other is filed in the department. Digital purchase order record is added to the PO File. When the goods arrive in the receiving department, the receiving clerk, Nabil, inspects them and reconciles the items against the information in the digital PO and the packing slip. He then manually prepares two hard copies of the receiving report. One of these copies accompanies the goods to the inventory warehouse, where Nabil shelves the goods and updates the inventory subsidiary ledger from his terminal. After that, he files the receiving report in the department. The other copy of the receiving report is sent to the Accounts Payable (AP) department, where the AP clerk, Sumayyah, files it until the supplier's invoice arrives. When she receives the invoice, she pulls the receiving report from the temporary file, prints a hard copy of the digital PO, and reconciles the three documents. At this time, Sumayyah updates the digital AP subsidiary ledger, the AP control account, and the inventory control account in the General Ledger from her terminal. Sumayyah then sends the invoice, receiving report, and the purchase order copy to the cash disbursements department. Upon receipt of the documents from AP department, the cash disbursements clerk, Ilyas, files the documents until their payment due date arrives. On the due date, he prepares a check for the invoiced amount, which is sent to the treasurer who signs it and mails the check to the vendor. Ilyas then updates the check register, AP subsidiary ledger, and the AP control account from his terminal. Finally, he files the invoice, purchase order copy, receiving report, and check copy in the department. Each day, employees of Sports World Sdn Bhd record their hours worked on timecards, which are reviewed by supervisors for correctness and submit to the payroll department at the end of each week. Using a terminal connected to the central payroll system, which is located in the data processing department, the payroll clerk, Emma, inputs the timecard data, prints hard copies of the paychecks, print two copies of the payroll register, and posts to digital employee records. Emma files the timecards in the payroll department and sends the employee paychecks to the various supervisors for review and distribution to their respective department employees. She then sends one copy of the payroll register to the AP department, and files the other with the timecards in the payroll department. The AP department clerk, Sumayyah, reviews the payroll register and manually prepares a disbursement voucher. She sends the voucher and the payroll register to the general ledger department. Sumayyah then writes a check for the entire payroll and deposit it in the imprest account at the bank. Finally, Salleh files a copy of the check in the AP department. Once the general ledger clerk, Mohan, receives the voucher and payroll register, he posts to the general ledger from the department terminal and files the voucher and payroll register in the department. Required: a) List FIVE (5) internal control components described in the COSO framework. (5 marks) b) Based on the case above, identify and briefly describe FIVE (5) internal control weaknesses associated with these systems as how they are currently designed. (10 marks) c) Based on your findings in (b), suggest relevant internal control practices to mitigate the associated risks. (10 marks) Prepare your answer for the (b) and (c) in a two-column table as shown: a) Internal control weaknesses b) Suggested internal control Your answer Your answer

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Answer number 1 The five components of COSO control environment risk assessment information and communication monitoring activities and existing control activities 1Control Environment How has managem... View the full answer