• Energy restrictions or shortages • Employee skills and capability • • • Election of government officials with new political agendas • Process modification without proper change management procedures • New laws and regulations • Process execution errors • Public policy, including higher or taxes • Poorly designed processes • • Suppliers cannot deliver quality goods on time • Privacy • Insufficient capacity to handle peak IT usages • Terrorism • Data or system unavailability • Corporate citizenship • Poor systems selection/development • Human resource issues causing production shortages or stoppages • • Changing demographics, social family structures, and work/life priorities • Security breaches • • • New e-business technologies that lower infrastructure costs or increase demand for IT-based services • Emerging technology • Increased or decreased availability of data • Interruptions or downtime caused by external parties 7.9 Explain what is meant by objective setting and describe the four types of objectives used in ERM. Objective setting, the second ERM component, is determining what the company hopes to achieve. It is often referred to as the corporate vision or mission. The four types of objectives used in ERM are: Strategic objectives are high-level goals that align with the company’s mission, support it, and create shareholder value. Management should identify alternative ways of accomplishing the strategic objectives, identify and assess the risks and
Hold storeroom employees responsible for all inventory losses. 4 Alterations to physical inventory counts and perpetual inventory records Unauthorized access to inventory records. Fraud Limit physical and logical access to the inventory records to authorized employees. Require that all adjustments to inventory records be approved by a responsible official. Examine physical inventory counts and perpetual inventory records for evidence of fraud Terminate any employees that commit fraud 5 Many customer refunds and credits. Collusion customers, salespersons, common carriers, and the shipping and accounting departments of Covington. Poor product quality Segregate duties so refunds and credits are authorized by responsible employees not otherwise involved in sales, shipping, or maintaining accounts receivable. Fix production problems 6 Many original documents are missing or lost. However, there are substitute copies of all missing originals. Failure to use pre-numbered documents. Fraud was perpetrated, original copies of the documents were destroyed, and they were replaced by photocopies. Use pre-numbered documents to facilitate the control and identification of documents. Investigate all instances where originals are missing and photocopies are used. 7 An unexplained decrease in the gross profit percentage has occurred. Granting unauthorized discounts or credits to customers. Theft of inventory Require the approval of a responsible party before granting customer discounts or credits.
Identify the internal control weaknesses in Lancaster’s system, and recommend ways to correct them. Adapted from the CMA Examination Weakness Recommendation authorization form describing the item to be acquired, why it is needed, expected costs, and benefits. purchases over a certain amount are not reviewed and approved by top management. The purchase requisition should include an item description, why the item is needed, estimated costs and benefits, account code, useful life, depreciation method, and management approval. Large sums of money can be spent on equipment. Large purchases should be approved by top management requisitions for fixed assets are intermingled with requisitions for inventory, even though they are very different purchases. This results in a lack of control over the much more expensive equipment acquisitions. mention of pre-numbered purchase requisitions or purchase orders. Authorized equipment acquisitions should be processed using special procedures and purchase orders. Copies of equipment purchase orders should be distributed to all appropriate departments so they can be monitored. Pre-numbered purchase requisitions and purchase orders should be used so that all documents can be accounted for. engineering is not inspecting machinery and equipment upon receipt. is not tagged and controlled to prevent theft. engineering is not helping with the equipment installations. and equipment Machinery and equipment should be subject to normal receiving routines. In addition, plant engineering should inspect the machines to make certain the correct item was delivered and that it was not damaged in transit. All new machinery and equipment should be assigned a control number and tagged at the time of receipt. engineering should help with the equipment installations to ensure expensive equipment is not damaged. Machinery and equipment accounting procedures,