QUESTION 4 - IMPLEMENT OPERATING PROCEDURES AND MONITOR POLICY (ELEMENTS AND PERFORMANCE CRITERIA:
1. Review and develop internal control procedures, reflecting application of corporate governance requirements to internal operations.
2. Produce, review and distribute required reports within agreed timelines.
3. Detail and document internal control procedures in standardised
formats to promote consistency of use.
4. Develop and report on performance indicators to evaluate compliance with internal control procedures.
5. Identify and evaluate variations in adoption of corporate governance requirements in operations to determine causes.
6. Develop and implement modifications to procedures to facilitate compliance with internal control procedures.
CASE STUDY: OBLONG FASHIONS PTY LTD - South West Sydney Branch
Oblong Fashions Pty Ltd has several branch offices throughout the Sydney region. The Regional office is located in Sydney CBD. The South West Sydney branch office consists of a branch manager and 5 clerical assistants. The branch manager reports to the regional manager. There is no accountant on site.
There is a Finance Manager at the Regional Office, who is responsible for the integrity of the finances for the entire Sydney region.
The South West Sydney branch has its own bank account in which daily takings are deposited by the cashier at the end of each day. The cash register rolls are reconciled to these cash deposits by the sales clerk.
Cheques/EFT payments are drawn from the bank account to pay branch suppliers. The cheques/EFT payments must be signed by either the branch manager or the regional manager.
Expenditure reports are completed by the branch manager who then sends them to the regional office.
Banks statements are received by the branch manager who performs the bank reconciliation on a monthly basis.
A review of the branch's cash position in comparison to last year indicates a significant drop despite this year's sales appearing to be similar to last year.
Required:
You have been engaged to review the above policies and procedures of the South West Sydney branch and then prepare a report to the Regional Office detailing the following:
1) Identify and evaluate the possible cause of this year's reduced cash position at the branch.
2) Identify 3 internal control weaknesses in the South West Sydney branch.
3) Evaluate the potential implication to the business of each of the weaknesses identified.
4) Suggest an improvement for each of the weaknesses identified.
5) Develop a modified policy & procedure for ONE of the weaknesses you identified above that will improve internal control. (NOTE: you may wish to use the standardised format of Sample SWSi Business Pty Ltd Finance Policies & Procedures Manual as a guide on the appropriate format for your policy.)