ABC Limited is a manufacturing firm with a workforce of more than 100 employees. Mr Peter has recently joined the firm as the account payable clerk. Miss Emma is the accounting department head, and she is concerned about the cash disbursement system. Therefore, she has asked Mr Peter to analyse the firm's cash disbursement system and identify the internal control weaknesses from the system. Following is the description of the cash disbursement system. In the temporary file, the account payable clerk receives the supplier's invoice and reconciles it with the purchase order. The accounts payable clerk records the purchase in the purchases journal from the clerk's computer terminal and records the liability by adding a record to accounts payable subsidiary ledger. The clerk then updates the inventory control and accounts payable control accounts in the general ledger. The purchases order and invoice are later filed in the department. Each day, the clerk visually searches the accounts payable subsidiary ledger from the computer terminal for invoices that are due to be paid. The clerk prepares the cheque and records it in the digital cheque register. The negotiable portion of the cheque is mailed to the supplier, and a cheque copy is filed. The clerk then closes the liability in the accounts payable subsidiary ledger and updates the accounts payable control and cash accounts in the general ledger. Required: Analyse the internal control weakness in the system.
Question
ABC Limited is a manufacturing firm with a workforce of more than 100 employees. Mr Peter has recently joined the firm as the account payable clerk. Miss Emma is the accounting department head, and she is concerned about the cash disbursement system. Therefore, she has asked Mr Peter to analyse the firm's cash disbursement system and identify the internal control weaknesses from the system. Following is the description of the cash disbursement system.
In the temporary file, the account payable clerk receives the supplier's invoice and reconciles it with the purchase order. The accounts payable clerk records the purchase in the purchases journal from the clerk's computer terminal and records the liability by adding a record to accounts payable subsidiary ledger. The clerk then updates the inventory control and accounts payable control accounts in the general ledger. The purchases order and invoice are later filed in the department.
Each day, the clerk visually searches the accounts payable subsidiary ledger from the computer terminal for invoices that are due to be paid. The clerk prepares the cheque and records it in the digital cheque register. The negotiable portion of the cheque is mailed to the supplier, and a cheque copy is filed. The clerk then closes the liability in the accounts payable subsidiary ledger and updates the accounts payable control and cash accounts in the general ledger.
Required: Analyse the internal control weakness in the system.
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