Question 2 Answer for (b) QUESTION 2A. In Akhwan Company, operations director Mr Tamad recently realized there had been anincrease in products failing during the final quality checks. These checks were carried outin the QC (quality control) laboratory, which tested finished goods products before beingreleased for sale. The product failure rate had risen from 1% to 4% in two years' time whichmeant an increase of hundreds of items of output a month which were not sold to Akhwan'scustomers. The failed products had no value to the company once they had failed QC as therework costs were not economic. Because the increase was gradual, it took a while for MrTamad to realize that the failure rate had risen.A thorough review of the main production operation revealed nothing that might explain theincreased failure and so attention was focused on the QC laboratory. For some years, theQC laboratory at Ikhwan, managed by Ramly, had been marginalized in the company, withits two staff working in a remote laboratory away from other employees. Operations directorMr Tamad, who designed the internal control systems in Ikhwan, rarely visited the QC labbecause of its remote location. He never asked for information on product failure rates to bereported to him and did not understand the science involved in the QC process. He relied onthe two QC staff, Ramly and his assistant Rahman, both of whom did have relevant scientificqualifications.The two QC staff considered themselves low paid. In practice, there are supposed to reportto Mr. Tamad. The work was routine and involved testing products against a set ofcompliance standards. A single signature on a product compliance report was required topass or fail in QC and these reports were then filed away with no-one else seeing them.It was eventually established that Ramly had found a local buyer to pay him directly for anyof Ikhwan's products which had failed the QC tests. The increased failure rate had resultedfrom his signing products as having 'failed QC’ when, in fact, they had passed. He kept theproceeds from the sales for himself, and also paid his assistant, Rahman, a proportion of theproceeds from the sale of the failed products.Required:b. Discuss deficiencies in the internal control that led to the increased product failures atAkhwan.

Name: Question 2 Answer for (b) QUESTION 2A. In Akhwan Company, operations d
Uploaded: 2024-03-20T06:57:05.000Z
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Description: Question 2 Answer for (b) QUESTION 2A. In Akhwan Company, operations director Mr Tamad recently realized there had been anincrease in products failing during the final quality checks. These checks were carried outin the QC (quality control) laborator