Read the case study and answer the three questions that follow. Case Study You have recently been appointed as the financial consultant of Paramount Pty Ltd to assist the Accountant with analysis of performance, preparation of budgets and making improvements to the operations of the finance department in order to comply with taxation liabilities, protect assets, increase efficiency and ensure that financial reports are accurate and complete. Use the financial data for Paramount Pty Ltd to assist you with the assessment tasks.

As a part of your consultancy role, you conduct an internal audit. You uncover the following processes that you believe need to be strengthened for Paramount Pty Ltd.

Service invoices for some repairs to equipment were not signed or linked to a purchase order. There was no check that the work had actually been carried out.

While the overall corporate customer base is increasing from year to year, there may be internal control issues relating to how much reliance the organisation places on them and how credit applications forms are approved.

Some discounts that were being given to customers were recorded as a net amount on the invoices and gave no indication of the discount from standard prices.

Bad debts are netted off against sales amounts without keeping track of actual bad debts.

Some cash registers in the stores were not reconciling the cash in drawer with the register printout.

Not all timesheet overtime amounts were being authorised by the line manager.

Not all assets in the stores had unique codes fixed to the asset.

In busy times the cashiers that operated the registers were also asked to do their own reconciliations and banking. Sometimes the cash was held in the store for a day or two.

Vitamins and supplements stock balances are tracked through an external system that is not integrated with MYOB, so manual invoice number does not match MYOB invoice number, thus, making it difficult to reconcile debtors accounts. Therefore, no reconciliations are done for larger customers.

In some branches, some suppliers are paid in cash from daily cash receipts. Then the difference is banked and the summary is sent out to the accountant for recording. However, often these summaries are a few days late and suppliers invoices get lost in other paperwork. Mary, the accountant has mentioned to you that it causes difficulties recording the VAT and reconciling the bank.

To complete this part of the assessment, you will be required to correctly answer the following questions.

Consider the results of internal control audit at Paramount and identify four (4) risks that could lead to a misappropriation of funds and suggest ways to mitigate these risks.