Lorenz is a 'passive' owner of Dodgy Ltd. ("Dodgy") (i.e., he owns the company as an investment but is not actively involved in managing operations).

Dodgy sells 10 completely different products, each coming in only 1 size, 1 colour.

The table below summarises relevant financial and operational information for fiscal year 2022:

 

Despite selling goods only online, customers DO NOT prepay. All customers receive an invoice along with their goods (i.e., invoice attached to package) and have 14 days to deposit their payment into Dodgy's bank account (account details provided on invoice).

The 'sales order to receiving payment' process involves only three (3) staff members, all performing various tasks as needed. Staff divide the individual tasks among themselves thus sharing roles from picking and packing to shipping goods to customers and recording related transactions (shipping records, updating inventory records, etc.).

The entire sales process requires relatively few process steps, is highly standardised, and overseen by a general manager. Turnover among the three staff members is high.

Question:

What type of control during the GL&FR cycle would provide Lorenz with the greatest comfort making the occurrence assertion with respect to sales data? Specify the 'type' in terms of the intent of the control, the frequency with which the control is to be executed, and the operations of the control.

Note: the question asks about how to categorise the type of control, NOT to be explicit about what specific control you recommend. Justify your classification.

Question:

Lorenz recently read about the COSO framework and is now wondering if he can clearly conclude - solely based on the information about Dodgy provided above - that an important control activity may be violated by the company. (a) Which control activity, if any, is likely being violated in daily operations. (b) Justify your answer and (c) address mitigating factors.

 

Question:

Explain why taking a functional perspective of Dodgy to come up with adequate employee performance assessment measures (i.e., KPIs that motivate high performance) would be problematic.

Account Sales Revenue Amount 2,000,000 Composition 100,000 individual sales transactions Method Online sales