HerbaMed Ltd is a South African company that specializes in the development, production, and distribution

of herbal$-$based pharmaceuticals. The company has implemented various policies, actions, and procedures

as part of its internal control system:

$1.$ HerbaMed Ltd mandates annual ethics training for all employees, followed by the signing of a code of

conduct. This code, formulated by the board, is detailed in workshops led by senior management. Allegations of code violations are thoroughly investigated by an ethics committee.

$2.$ To safeguard proprietary information, research personnel at HerbaMed Ltd are prohibited from taking

any form of portable electronic devices out of the research facilities. The enforcement of this policy is

ensured by the use of advanced security checkpoints at all research facility exits.

$3.$ A dedicated project accountant at HerbaMed Ltd tracks and documents the costs associated with

various research endeavors using advanced accounting software, ensuring accurate and timely

financial reporting.

$4.$ Regular meetings between the head of finance and the head of research are held to review and

discuss any significant variances between actual and projected research expenditures, promoting

financial accountability and transparency.

$5.$ The finance and sales heads conduct monthly reviews of accounts receivable, focusing on adherence

to the $30-$day payment terms. Accounts exceeding $120$ days without payment are flagged for review

and potential write$-$off, subject to the finance head's approval.

$6.$ Bi$-$monthly, a board$-$level committee convenes to evaluate emerging trends in the herbal

pharmaceutical market, regulatory changes, and overall industry dynamics, ensuring strategic

alignment and compliance.

$7.$ HerbaMed Ltd stores its finished products in a specialized, climate$-$controlled storage facility to maintain product integrity and shelf life.

$8.$ A customer feedback hotline managed by the marketing team collects and analyzes consumer

complaints and suggestions regarding HerbaMed Ltd$$s products, offering insights into potential areas

for improvement.

$9.$ Access to the inventory database is strictly controlled$$ the warehouse supervisor has limited$,$ read$-$only

access, while inventory staff have no direct access to these records, minimizing the risk of inventory mismanagement.

You are required to:

a$)$ List the components of a system of internal control. $(5$ Marks$)$

b$)$ Identify the component$($s$)$ of the system of internal control to which each of the above points $(1-9)$ relates.

Give reasons for your choice. If you have chosen 'control activity', state which type$($s$)$ of control is $($are$)$

being implemented, for example segregation of duties.

$(18$ Marks$)$

c$)$ List the limitations of control and for each limitation$,$ explain how it could potentially impact the business

of HerbaMed Ltd$.$