Assume you are the management accountant for the Mercury Group and the CFO has asked you to assist her in assessing the internal control environment of the Finance Department. The staff within the Finance Department collect data generated by the various departments and business units within the organisation, analyse it and then generate reports that are disseminated across the organisation. This data is transmitted electronically and it currently appears that most operational staff within this Department have access to the complete suite of information passing through their accounting system, including payroll data. The accounting system has a number of inbuilt safeguards to ensure that the right type of information is being entered in the right place, in addition to requests for confirmation for entered information that is abnormally high or low for specific data types. However, these controls have been routinely overridden by both operational and management staff. One of the directors regularly authorises the payment of private expenses through the company bank account and accesses funds without following the proper procedures. The Departments senior accountant, George Bank, has been charged with the responsibility of preparing, authorising and effecting all cash payments. This responsibility extends to supplier, payroll, petty cash and all other miscellaneous payments. George has walked you through the system he has in place and indicated that documentation is matched with all components of the purchasing process and that this is the prerequisite for any payment being authorised. He has kept meticulous files and was able to produce the purchase order, proof of delivery and supplier invoice for any payment you selected for audit. There have been some anomalies in the records, such as Georges signature appearing on a number of receiving reports for purchased goods (a role that would normally be undertaken by the warehouse staff that received the shipment).

Required: Identify four (4) lapses in the Finance Departments control environment and explain the risk that each present. Suggest a specific control that you might introduce to address each of the lapses identified. (8 marks)