Questions 2

RSS Recruitment Ltd places highly qualified personnel in employment in the marketing and advertising industry. The company was two years ago and the initial capital of Ghc 150,000.00 for the company was provided jointly by the bank and the managing director, Mr. Beech. The bank has a floating charge over all the assets of the company and the overdraft is currently running at or about the limit set by the bank.

Mr. Smith, a senior recruitment consultant responsibility includes training other recruitment consultants and placing clients in employment. Mrs. Burns, the office manager controls all office administration including fees, expenses, wages and receipt and payment of cash. Mrs. Burns raises all invoices for fees when Mr. Beech informs her of a placement and initiates payments of expense invoices only after Mr. Beech has authorized her to do so. Mr. Beech is the sole cheque signatory. Mrs. Blyth maintains the accounting system. Access to the computer system is not restricted in any way but copies of the data files are regularly made and dated.

Required.

1. Describe the improvements in the internal control system which would reduce the control risk. (10 Marks)

2. Define Audit Risk (2 Marks)

3. Explain the components of Audit Risk (8 Marks)