Jebrah Manufacturing Limited (JML) is a small company with about 50 employees. It has a local area network, production systems software, timekeeping software, and accounting systems. These are all locally purchased and locally maintained software systems. There are no in-house information systems personnel. The controller is responsible for setting up new users and changing user capabilities based upon scripts (standard instructions) provided by the network supplier. If she has any problems, she telephones the network supplier, who logs on to the system and makes the changes for her online. All three accounting personnel and the owner of the company have access to all accounting systems. Manufacturing employees have access to timekeeping and production systems. The controller prepares the bank reconciliation, but the owner signs payroll cheques and accounts payable cheques (with supporting documentation attached). The controller is responsible for recording all changes in wage rates in the accounting systems and writing off accounts receivable. The receptionist is responsible for printing reports, while there are two staff members who handle both accounts payable and accounts receivable transactions.
REQUIRED
1. Describe the problems in segregation of duties for each application cycle: payroll, accounts receivable, and accounts payable. For each problem, state what could go wrong (the risk).
2. What are some of the practical changes that can be made at this company to improve internal controls? Justify your response.