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1. Comment on the efficacy or otherwise of internal control systems of NPD relating to its cash receipts?

2. How efficient was the company’s HR department?

3. Was it the weakness of the system or failure by managers to follow the system properly that led to the fraud. Justify your answer?

4. List the records that must be inspected by Bashir Orakzai in the process of completing his investigation?

5. Keeping in view the context of Audit Reports, which type of report is expected if the situation is not sorted out before audit? What recommendations should Bashir Orakzai make in his Investigation report?

6. List various lapses of internal control that had taken place in case of Gul Khan’s work?
 

The Company Northern Pharma Distributors Ltd (NPD) is one of the larger companies located in KPK. dealing with wholesale trade in pharmaceutical. surgical and other medical products. They represent a number of major foreign and pharmaceutical manufacturing companies in KPK. Their clients Iist comprises of over 4,000 small scale retailers and pharmacies spread all over the KPK province. Their annual turnover is well is excess of Rs five hundred million. Pakistani A large number of their clients pay them in cash. Many deposit their dues through on-line banking. In addition. NPD's 16 travelling salesmen also collect monies from customers on a regular basis. The company's cash office has a designated cashier who collects cash and cheques from all payers. According to the procedure prescribed for receipts, the cashier must issue a formal receipt for every amount received. Receipt books are pre-numbered. Unused receipt books are held in lock and key by the chief accountant. The procedure states that whenever the cashier finishes with a receipt book. he must show the fully used up receipt book to the chief accountant who should initial on the back of the copy of the last receipt retained in the book and then issue a fresh receipt book to the cashier. The Cashier The company's cashier is Gul Khan, a quiet person who is quite efficient and amiable. None of the customers or travelling salesmen has ever complained of any rude or uncooperative behavior from Gul Khan. His work is usually up to date: there has never been any discrepancy in his daily cash receipt summary and bank deposit sheets, or during any of the surprise cash checks carried out in compliance with the internal control procedures. His reputation as a honest person is well established - in fact the chief accountant now carries out surprise cash checks only rarely. However, very few people are really close to Gul Khan who prefers to keep his own company. Not many persons in the company really know anything about his personal life. He was appointed some six years ago through the recommendation of a former chief accountant who has now left the company. Another important