Evaluation Of The Required Internal Control Measures

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Question :


You have been recently employed as an accountant for Bucks Phyz. The CEO has tasked you with reviewing the sales processes of the company and has provided you with key information based on interviews with key staff relating to the sales process (available in Interact).

The CEO is also considering the introduction of corporate credit cards for the purchase of smaller items for the business. At present, all purchases require a purchase order to be raised and sent to a supplier. This process was an issue when they recently tried to book a training course for two team members and the bookings needed to be completed on line. The staff needed to book the course themselves and seek reimbursement from Bucks Phyz. The CEO would also like advice regarding the impact of the introduction of corporate credit cards and who should be issued with a card.

Using the information provided to you, you need to prepare a business report to the CEO including the following:

  1. A summarised overview of the Sales Process for Bucks Phyz.
  2. Identification of;

      - internal control weaknesses in Bucks Phyz sale process; 

      - the impact these weaknesses could have on the organisation; 

      - specific internal controls which could be implemented by Bucks Phyz in the coming weeks to mitigate the risks posed by the internal control weaknesses you have identified. The CEO does not want theoretical controls suggested.  They want practical controls that they can implement. 

  3. A review of the impact of the introduction of corporate credit cards. This needs to include:  
    1. a detailed review of the benefits and potential risks associated with the introduction of corporate credit cards within Bucks Phyz. 
    2. the specific Internal Controls which should be implemented by Bucks Phyz to minimize the impact and occurrence of the risks you have identified?
    3. a recommendation to the CEO regarding who should be issued with a corporate credit card and why?
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Answer :


In order to have the financial sustainability within a company it is of prior importance to maintain a regular accounting and finance report. A finance director of a company is subjected to the responsibility of account and financial reporting as the CEO of the company considers this final report to undertake required steps in order to implement the changes in the systems that are necessary and beneficial for seamless operation of the sales process of the company (Xu & Tang, 2015). This financial report attempts to illustrate several aspects of the sales process of Bucks Phyz company in order to understand the changes that are required regarding the internal control system of the company. The report also following the identification of the internal control weaknesses of the sales process of the entitled company provides possible measures that need to be considered to improve the current situation. As per the suggestion of the CEO the risks and benefits that are associated with introducing the system of corporate credit card within the organization have also been accounted in the report in order to recommend the CEO of the best possible measure. 

Overview of the sales process of Bucks Phyz

The sales process of Bucks Phyz has been following an ancient structure for several years until necessary changes in the system have been implemented in recent years. New employees have been assigned with new tasks because of implementing new procedural changes and policies. In the previous years the company have encountered fraudulent in the sales department that resulted in the current changes of the sales process of the company. The financial director of the company has been allocated with the sole responsibility regarding the functioning of sales and finance department of the enterprise. 

The financial director of the company takes care of the fact that the strategic goals of the company are accomplished along with that he or she is concerned with the fact that the proposed write offs are appropriately approved by the authorization of the finance director. A new pricing tool has been introduced in the sales department for seamless operation of the processes and it is used by the managers in order to calculate the prices with more effectiveness and ease. A new policy has been introduced to ensure that the finance director of the company signs the actual contracts. However, few employees in the sales department are not entirely satisfied with the status of the legal terms that are implemented in dealing with the customers. Several customers have also felt the need of necessary changes prior to the contract drafts of the company.

Identification of issues

For seamless operation of the business procedure, it is important for the board of directors to ensure efficiency, reliability and security towards the managers of the company, customers and most importantly to the stakeholders. Financial department is one of the areas of concern in this case. It is an evident fact that the weaknesses within the internal control procedure of a company need to be identified based on the guidelines that are issued by the Securities and the Exchanges Commissions for the monitoring purpose of the internal control. 

Internal control weaknesses in Bucks Phyz sale process

Evaluating the functioning of the sales department of the company several weaknesses have been identified regarding the internal control of the company. The major weaknesses that require to be mitigated are:

  • Lack of monitoring in the transactions 

Lack of monitoring of the transaction is one of the major issue that reflects internal control weakness. Because of lack of monitoring, several errors regarding keeping account of the transactions have been encountered. For instance, the company has faced cases where credit checks have been performed in spite of previous signing with the same customer and the invoice had already been issued. 

  • Lack of training of the employees

Implementing new systems comes with the responsibility of training the employees effectively so that they can successfully operate the system (Osadchy & Akhmetshin, 2015). The company has introduced new calculating standards in order to help the managers. However, as the mangers in the sales department are well acquainted with the previous system most of them use the previous system. It shows lack of internal control and the managers due have not grasped the new pricing tool to lack of professional training.  

  • Problems regarding the contract drafts

The clients and the customers are not entirely happy with the system that are used in order to contract the drafts and there is no particular policy regarding drafting the contracts. 

  • Communication error

Lack of instruction from the higher management level to the mangers of the sales department portrays communication gap in the operational levels (Rane,  Mulla, Sarguru & Sayed, 2017). 

  • Error in implementing new systems for the managers 

The company has implemented several systems and policies that the managers and the customers are not entirely satisfied with it. This portrays that the mangers do not understand the reasons for the implemented changes and it is important for the company that they clearly demonstrate the purpose of the implementation to the managers. 

Impact of the weaknesses

The weaknesses that are identified are causing operational issues in the sales process of the company. The sales process has not been a smooth operation any more and because of the lack of instructions and communication errands the mangers and the employees are facing problems regarding operating a particular job that has been assigned to them. Lack of a particular policy regarding contract drafting has resulted in confusion among the clients and the company (Chen, 2015). As any specific accounting standard is not followed and the mangers are facing problem with the new pricing tool, operational hazard has been arose. The overall internal control weaknesses are resulted into frustration of the AR team. As there is no specific standard that is to be followed regarding signing agreements and sending offers to the customers, the customers are subjected to discrimination. This creates dissatisfaction regarding the services of the organization. Lack of monitoring and lack of entry in processing the receipts the allocation process has been difficult for the AR team of the company.

Specific internal controls 

  • It is important to introduce the cataloguing of the internal procedures like documentation of the financial transaction and internal auditing. 
  • Assessing the design of the control process is important (Rane, Mulla, Sarguru & Sayed, 2017).
  • It is important to evaluate the customer feedbacks and the remarks of the employees in order to implement necessary changes in the current system. 
  • The company needs to arrange required training for the managers for seamlessly operating the new pricing tool.
  • Monitoring the internal control staff on a regular basis is also important (Wang & Miao, 2015). 

Impact of introducing corporate credit cards 

Review of benefits and potential risks 


Corporate credit cards provides the employees and the organization with several benefits and it can be classified into different groups based on the mode of payment. The two distinct groups are individual payment cards and company payment cards. 

  • Corporate credit cards have the credential to add value proposition to the company and the employees (Pros and Cons of Business Credit Cards, 2018). 
  • It helps as one of the major motivational factors for the employees.
  • It is useful in saving time of the employees as the card is often used in the purpose of business travel and availing the card saves time of booking flight tickets and other services. Employees can use the time in serving the company.
  • It enables the opportunity for the employees to avail reward option.
  • It saves the travelling and the hospitality cost of the employees and also helps in the international recognition of the company.

Potential risks 

Corporate credit cards often create errand for the companies that has introduced it to it employees due to lack of organizational policies. 

  • Employees misusing the cards can defame the name of the company.
  • Lost corporate cards can create many errands regarding the protected and confidential corporate information of the company (Pros and Cons of Business Credit Cards, 2018).
  • Improper uses of the cards can result in corporation breaches that might create licensing problems of the company.
  • Effective internal monitoring of the expenditure due to the corporate cards can raise the current production cost of the company (Pros and Cons of Business Credit Cards, 2018).
  • Fraudulent charges can be increased due to misuse of the card and the company being an individual legal entity might face legal danger.   

Necessary internal controls 

  • It is important for the company to implement strict policies regarding the usage of corporate credit cards.
  • The expenditure criteria of the card needs to be fixed according to the operational purposes of the employees (Prabowo, Christy & Nitasari, 2017).
  • The services need to be specified that can be availed with the aid of the card for instance business travelling and living cost of staying in a hotel.
  • To avoid any possible fraudulent it is important to monitor the expenditure of individual employees through the card and it is important for the company to keep a track and a record. 

Recommendation to the CEO

After evaluating the pros and cons of introducing corporate credit cards in the Bucks Phyz Company, it is suggested that the CEO needs to conduct necessary research regarding the user friendliness of the cards in accordance with the operations of this particular company. Along with that it is also important for the CEO to introduce necessary policies in order to control the use of company credit cards. Company credit cards can be introduced for availing operational ease and simplify the process of payment (Pros and Cons of Business Credit Cards, 2018).


In the light of the above study, it can be stated that Bucks Phyz requires implementing strict internal control monitoring to improve the current mismanagement of the sales process. The payment system of the company can be simplified with introduction of corporate credit cards only with effective measures regarding internal control.