Enquiries and observations associated with understanding internal controls at ABC Ltd. revealed the following information. The managing Director, David, has always placed a premium on the values of integrity and ethics. For years, business has been conducted on a handshake, and commitments made by the company were always fulfilled. Integrity and ethics are also valued in employees, and this quality has is found in any employee who has been with the company for more than a year or two. Recently, due to growth in business the company has hired a new Chief operating officer - Adam and a Chief Finance Officer- Julia.

Many accounting and information systems issues have been delegated to the CFO, Julia, who has the responsibility for the company's financing needs, accounting, and information systems. Almost immediately after her appointment to the role of CFO, Julia initiated a project to upgrade the company's computerized accounting system. The new IT Director James, reports directly to Julia and oversees data control and system security. Key positions within IT include a director of computer operations and a programming director. The IT manager is also responsible for managing the current system until the new system has been tested and is ready to use. Furthermore, Julia recently hired an internal auditor- Harry. Harry reports directly to Julia-CFO. Currently the internal auditor is reconciling all the bank accounts. The board of directors approved the hiring of an internal auditor, and, in the absence of an audit committee, Julia plans to discuss internal audit findings with the board of directors on an annual basis.

Julia is currently under pressure to produce financial statements within 10 days after the end of each month. David believes that this is essential to good business management. Once the financials are produced, they are closely reviewed with managers of day-to-day operations to ensure that managers are held accountable for the resources with which they are entrusted.

1. Indentify the control environment factors that affect the company's internal control.

2. List the strength and weaknesses in ABC Ltd's internal control.