Internal Control System

(17) The Internal Audit Director told that GEC Vietnam's policy of control is in full compliance with the Group policies. The internal audit department consists of one director and four staff members. In addition, there are 1 internal auditor at each plant and branch. The report of the internal audit department is sent directly to the CEO every month. In addition, the quarterly consolidated report will be sent to the Board of Supervisors, which will be the basis for the Board of Supervisors to check and review at the beginning of the following quarter. Every year, the Group's internal audit team will visit Vietnam to audit the Groups policies. The year-end audit report of the internal audit department only recorded a minor error of the warehouse division. After investigation, it was determined that the lack of goods was due to the storekeepers carelessness while checking the goods. Because this is the first violation and the amount i not large so the storekeeper was only reprimanded. (18) The Internal Audit Director also indicated that the risk of fraud at GEC is very low because the company had a rigorous control process and operational cycles were subdivided into specialized divisions. The company policy also requires cross-checking and cross-reconciling between departments every month. All of the reconciliations are documented and stored in the department. (19) GEC currently uses Oracle's ERP system for all departments. Th Internal Audit Director is very proud of the modern software system the company has recently invested nearly $100,000 in 2015. He said the system can handle and control automation at multiple stages, It has helped the company reduce input, provide information quickly, and support decision-making. He believes that with the rigorous controls of this system, the risk of error and fraud is very low, if not impossible. However, applying a new system, the work of the internal audit department is overloaded. The Internal Audit Director thinks that he needs an additional staff member with information technology expertise but the HR department disagreed even though he had suggested several times. Upon hearing this information, the CEO said that he was completely unaware of this, and that he would consider and direct the department for additional recruitment.

Based on the information provided about the internal control system, evaluate GECs internal control system.