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Dear Sir,
I would like to ask a general question, as I don’t know how to approach potential internal control questions in the exam:
Assuming, a question requires me to act as an auditor – how important is the indication of a person, which should perform certain activity, when it comes to assessing the adequacy of segregation of duties?
As an example I would like to ask about the sales system and collection of cash. Kaplan book says receipts are counted by the office assistant, recorded by the cashier and the sales ledger clerk agrees the amount received to the amount invoiced.
I used to work in the accounting department (US stock exchange company), where the cash collection was recorded by the treasury department (let’s say equivalent of cashier), but there was no office assistant involved and the invoice application was performed by AR department not sales clerk.I’m just confused to learn something different what is my hands-on experience.
Please clarify.
Thank you!
P.S. I have failed my first attempt and honestly for the first time I do not know, what I did wrong. Therefore I would like to make sure I’m preparing myself the right way.
Segregation of duties is relatively easy in a large company but very difficult in a small company which simply cannot afford several employees. There is a tension between internal control and cost efficiency.
In your exam, concentrate on internal control. If several parts of the same transaction are handled by the same person there is almost certainly room for improvement by splitting it up between several people. You will rarely be wrong suggesting this, but remember there are other controls that might also need to be talked about.
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