Auditing and Audit Committee Policy

1989 Words8 Pages
MEMORANDUM Date : November 10, 2010 To : Alchemy Corp. (Aren’t we addressing this memo to our parent co., Alchem Corp.?) From : External Audit Team Subject: Internal Control Weakness and related fraud risk After much research and time spent on understanding the inner working of Alchemy Inc., we have found some internal control weaknesses that could lead to potential fraud. Our audit procedures are designed to address internal control weaknesses and subsequent fraud risks in the most efficient and cost effective manner. We hope with our recommendation that Alchemy inc. will be able to minimize the risk of financial misstatement. We believe these concepts will have many positive impacts on the firm’s long-term…show more content…
Alchemy Inc. needs to have a more adequate system of safeguarding its main source of revenue, producing spheres. If this process is compromised, the firm will subsequently jeopardize its profitability and market position. Our recommendation consists of implementing a more integral system of assessing the value of the company’s products and restricting access to the finished spheres. The production of spheres is one the company’s largest sources of revenue and the production processes should be maintained and guarded at all costs. Though these methods might not be cost-efficient in the short-term, the firm needs to revamp their methods of safeguarding assets to increase the chances of long-term firm longevity and profitability. Alchemy Inc. should implement a system to lock the factory’s gates in Pleasantville and also having restricted access to the factory’s premises. These costs are minimal compared to potential fraud that might inquire due to this weakness. The final sphere products should be stored and shipped in more secure bins and bags. Compromising the quality of these costly spheres can damage the firm’s approach to quality and product control. If it is cost effective to Alchemy Inc., the management should integrate some sort of lock when the bins are left unattended or when the personnel is finished with the day shift. The code of conduct is in place, but the code is widely unknown by
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