TASK 4 (Discussion Task)
“INTERNAL CONTROL ANALYSIS 1”

Main Problem :
Explain how the principle of separation of duties is violated in each the following situations. Also suggest one or more procedure to reduce risk, and exposure highlighted in each of example.
Analyzed the problems : * How the principle of separation of duties can be an internal control system ? * How to make a good principle of separation of duties ? * What is the best internal control design for the job authorities ? * How to reduce risks in posting the receipt to the customer account ?
Learning objectives : * Identify the exposure to risk that a firm faces with respecting of asset and data, including the fraud. * Understand how to reduce risk and exposure the highlighted in every situation. * Recognize how the separation of duties become a part of internal control system. * Understand about the risk exposure to business and the importance of internal control to minimize the risk.
Solution
a. A payroll clerk recorded 40-hour workweek for an employee who had quit the previous week. He then prepared a paycheck for this employee, forged her signature, and cashed the check.
Violation:
The payroll clerk only have an authority to prepare the paycheck, not to signature or cashed the checks. The signature of payroll is the duty of HR manager, while cashed the paychecks is the duties of the cashier, so, the payroll clerk has violated his/her job description and his/her authorities.
Solution:
To reduce the risk, the company must make a clear workflow, the payroll clerk must be ensured only has an authority to make the paycheck, then from the payroll clerk, every paycheck must be received to HR manager to check it, if it’s agreed, then from the HR, it will brought to finance department, and it must be received by the A/P department first, the A/P department