March 2012: M plc
Question a i. Evaluate the risks to M plc associated with allowing subscribers to post comments and views on the newspaper website.

M plc is a long established publisher of newspapers and provider of web media. Based on their mission statement, their reputation is depending on the quality of report and information. The quality of information referred to truthful and accurate information given by M plc to the readers. The online version of newspaper that allows subscriber to post comments and view the newspaper website is a good decision. But they need to aware with the various type of risk that they need to face.

The first risk is about inaccurate post and false information. Subscriber can post anything in their mind that can attract more people for their own publicity. This will occur in M plc because they don’t have any control to edit or verified what the subscriber wants to comment. For example, the information about beauty of artist by taking a beauty capsule post in M plc website. This is a false statement where that artist having a neutral beauty without taking any beauty capsule.

Other risk is false claim about the information given in M plc website. When subscribers give a false statement, the injured party will be sue and take an action to the website owner rather than to the person who made the false posting. They will blame to the owner of web site where M plc have a power to delete and approve the comment that had post at the web site. M plc will need to responsible to other fault in this case by paying compensation, penalty and other things. For example, in this case J is a famous pop singer who had endorses range vegetarian meals. The post’s author claimed to have seen J eating a meet dish in restaurant. This post is a wrong statement. J is seeking for compensation from M plc for the loss of this earnings and also damage to her reputations.

Lastly, the controversial postings and inaccurate info also acceptable by M plc, this will create bad reputation to others. The professional criteria will be damage by malicious and rumour information that given by subscribers. It also will cause the truthful of the reader to the info given by M plc will be decrease. The loyalty of the reader also will be decrease.

ii. Recommend, stating reasons, appropriate controls that might be put in place in future to minimize the risks to M plc associated with malicious and inaccurate posts

M plc need to increase their control to avoid the risks will be happened again. The first control that M plc need to be done is take detail information about the subscribers during registration process. This detail will be needed to ensure they will be claim based on their fault if they don’t fulfill the terms and conditions given. Besides that, to ensure the detail was accurate, M plc can get the information from banking services where it can be traced during the payment using card credit. The information taken can be safeguard M plc from false claiming by the injured party.

M plc also need to increase their login control to avoid any fraud about the login transaction. The fraud will be happened when other person login using other ID and password or that account had been hacked by the hackers. M plc need to limited number of trial to enter password to login in that website. This method can ensure the person who login in that website is the really person who subscribe that website. More than that, M plc need to inform and create awareness to their subscribers to not remember their website password at the computers or other electronics tools. It will give big problems when their electronics tools had been stolen.

Another control is in terms and conditions to be subscribers, M plc need to state that M plc have a power to pursue action against any subscriber whose use the website and brings the company bad reputation. This control will be aware to the subscribers when posting their comment in the website. They were will be more responsible to post the accurate information to avoid from claiming by M plc.

The method to post comment control also need to be implement in M plc website. M plc need to set the post of comment must be needed after login using the subscriber ID. When using subscribers ID, we can identify their details and their activity in the M plc website. ID using will create responsibilities to the subscribers to post the comment at the website.
Lastly, the best control is staff approval control in M Plc Company regarding the post comment by the subscribers. When the subscribers want to post the information in the M plc website, their post must get the approval from the staff. The staff responsible to view and approve that good and wise comment only can be post. This method more complicated but give a good solution.

Question b i. Explain the importance of a robust control environment for M plc

Control is an important factor that needed in M Plc Company. The environment control will guide the management in M plc in achieving their goals. The environment control will be ensuring the efficiency and effectiveness in their business operation. The environment control also will be a standard or benchmark to the staff regarding their behavior and rules or framework in working. When M plc have a control environment, it will show the flow of information in the M plc company. More than that, the authority and delegation of power also will be more clearly to direct and ensure the objective of company will be achieved.

ii. Explain three ways in which weaknesses in the control environment appear to have contributed to the problems with journalist’s expense claims

The weaknesses in control environment that contributed to the problems with claims is M plc company don’t have a journalist’s expense budget. Without a budget, all journalists will be expenses based on their wants but not on their needs that will cause over expense. In addition, M plc’s directors will be review monthly management account. They can’t make anything change and control for the journalist expenses because they will be the last person to review that account.

Other weakness in M plc control environment is they don’t have authorization control before expense. All journalists buy everything needed for their work without getting authorization from the upper level of management. They will claim anything that they had bought that related with journalist activities including for their own interest. M Plc Company need to incurred high cost in journalist activity.

More than that, the staff culture factor also creates weaknesses to the M plc control environment. The staff attitudes that want an exclusive working style increase the cost of journalist expenses. Based on this case, M plc journalist will conduct the interview at the expensive restaurant; will be stayed at the expensive hotel and business class flight. As editors, who responsible to sign the claim form, he must be responsible to change this culture and create the awareness among the journalist. All people in a company must known that company having formal policy on expenses that stated maximum cost can be claim. The editors must approve the claim that only fulfills the policy only. The editors will be negligence in fiduciary responsibilities as a person to approve the claim that only fulfills the company expenses policy.

iii. Explain the difficulties that could arise from the board’s directive that the internal audit department should carry out regular reviews of journalist’s expenses

The internal audit department responsible to ensure the rules will be complies by other department or other people. Based on this case, internal audit department need to ensure the claims made by journalist of M plc is true and fair views with the item had bought and follow the rules. The internal audit department is hard to set rules in term of journalist expenses. The amount will be not relevant at all the time.

Besides that, the internal audit department can’t ensure the amount had been expense is fulfilling the requirement needed by M plc. This is because, M plc don’t have a standard or benchmark that will be a guidance to make a comparison. What the internal audit department can make is by asking the person who makes a claim why he or she doesn’t take other alternative that will be cheaper. This method is not efficient.

The more difficult method is to evaluate day to day journalist expenses. It will be more complicated and more time consuming. It will cause an internal stress to the internal audit department.

Question c
Discuss the three stated possible methods of managing M plc’s exposure to the movements of the USD against the GBP, your answer should include an evaluation of the costs and risks associated with each of three methods.
Switch to UK supplier
The decision to passes the cost to the third party is a good decision. But it also produces a various type a risk. The first risk is about the negotiation a fixed price under contract. The cost can change based on the tolerable of supplier in setting the cost. The fixed cost will be increase that set by a supplier for duration of contract.
Another risk is the arrangement where M plc may have to pay more for its pulp than its competitors. That may make their competitors offer the lowest price to the customers to sell their newspapers. This risk is likely to be occurred when the cost of pulp decrease or the fixed prices exceeds the present market price and market prices remain constant.
Invest in USD
When decide to invest in USD, it will provide more risk where this investment is just based on the rate of interest received on the bank balance. The income that they will be received will be not enough to cover the cost of capital M plc. It only can reduce the economic risk when the USD market was strengthening to pay a pulp. They also need to take a long time to receive the income from this investment.
Take the risk
This decision is relatively low cost strategy. M plc need to incur high cost during the increasing pulp cost. But they also will enjoy the risk where the pulp price falls. Another risk is the behavior of competitors and the price elasticity of newspapers. If other newspaper prices have to increase then M plc will be at competitive advantage. if readers continue to buy newspapers in the face of increasing pulp cost, it will no need M plc to push up the newspapers cost. This is because the sale amount can cover-up all the cost and will not affect the decision of customers to purchase.