Richard Palm is the accounting clerk of Olive Limited. He uses the source documents such as purchase

orders, sales invoices and suppliers' invoices to prepare journal vouchers for general ledger entries.

Each day he posts the journal vouchers to the general ledger and the related subsidiary ledgers. At the

end of each month, he reconciles the subsidiary accounts to their control accounts in the general

ledger to ensure they balance.

Discuss the internal control weaknesses and risks associated with the above process

Internal control weaknesses and risks associated are as follows:

No proper segregation of duties - the accounting clerk is the who prepares the journal voucher and records the transactions in the system. He is also the one who performs monthly reconciliation. With no proper segregation of duties, there is an increased risk of material misstatements due to error or fraud not being detected and corrected. Assets will also be susceptible to theft or misappropriation due to a lack of segregation of duties.

No review is being performed by the clerk before recording the transaction - before recording, the accounting clerk should have matched and reviewed the details per invoice to its supporting documents. With no proper review, there is increased risk that balances in the financial statements are not recorded at correct amounts e. g., liabilities recorded are not valid due to undelivered inventories, assets are overstated due to no actual goods received yet, etc. There's also a risk that transactions are not recorded at the correct accounting period since the clerk does not review the details in the source document.

No review is being performed on the work performed by the clerk - since no oversight or review is being performed, there is an increased risk that the clerk will record fictitious transactions e. g., fictitious sales, fictitious cash disbursement, etc that may result to material misstatements in the financial statements.

The following are the risks associated with the above process;

There is a lot of burden placed on one individual (Richard Palm).

There is no work distribution - Richard does the entire job from dealing with purchasing orders, sales invoices and suppliers' invoices.

The process is prone to fraud and errors as Richard has to manage too much work on his own. In the process of reconciling of the subsidiary accounts to the control accounts he may lose some of the data.

There is also data confidentiality risk - organizations' data should be handled with confidentiality and information should remain private.