Richard Palm is the accounting clerk of Olive Limited. He uses the source documents such as purchase orders, sales invoices, and suppliers’ invoices to prepare journal vouchers for general ledger entries. Each day he posts the journal vouchers to the general ledger and the related subsidiary ledgers. At the end of each month, he reconciles the subsidiary accounts to their control accounts in the general ledger to ensure they balance. Discuss the internal control weaknesses and risks associated with the above process.

Segregation of duties

Lack of computerized system

Explanation:

One obvious internal control weakness in the scenario given is segregation of duties. This is defined as the breaking down of a critical line of task into different stages with different individuals handling different stages of the task.

The aim is to prevent error and fraud as the action performed by an individual is subjected to review by another person and as such makes it impossible for an individual to cover up a fraudulent act except there is collision with others .

A computerized system which is the use of accounting software can also be used to integrate the function to increase the accuracy and speed of completion

The risks involved are

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