Justification for an Internal Control System Essay - 2

Justification for an Internal Control System - Essay Example he organization already has controls in place with the insurance and portfolio approach, the controller has chosen to develop a system to enable determination of intended operations within the organization. The system chosen focuses on the function of inventory management. At present, the company has an insurance policy that covers theft from both employees and outsiders. This system will evaluate the effectiveness of inventory management processes with the objective of facilitating a reduction in insurance premiums to the company. It will, therefore, complement the existing policy on insurance, while at the same time saving the company money. The system recommends that the stores department receives the good that the company purchases. It also recommends that suppliers invoice on delivery and provide delivery notes, lest the stores department declines to accept the goods. Additionally, the stores attendant in conjunction with the company security do the verification that the goods that the delivery invoiced are the ones it delivered. The finance department is to carry out occasional random spot checks to verify the case. The stores department then books the goods into the information system. After this, there is approval of the goods if they are in the general ledger, which is done in the finance department; this ensures segregation of duties and provides a check system for the two departments. Thereafter, the inventory controller at the finance department counter-checks each booking with related invoice to verify compliance with the invoice number, value added tax (VAT) computations, invoice amount, invoice quantity and reasonability of the prices. Then the head of finance on a daily basis should confirm that the inventory is booked on the right cost centre to help in distinguishing between cost of sales and operating expenses. If the booking is correct, the inventory controller gives approval and the general ledger is updated. Breakages With regards to items