Edexcel BTEC Higher National Diploma Unit 11 Financial Systems and A diting Assignment 1

Table of contents A. Introduction.....02 B. Analysis........02

I. Evaluate the effectiveness of accounting system within the business !!"#
1! The p rpose and se o$ the di$$erent acco nting records and comment pon the

%anaging Director& %s! 'iang(s $inal statement))))))))))!!!!!!!!)))!!!"# 1!1! * rpose and se o$ di$$erence acco nting records)))))!!!)))))!!"# 1!#! Comment pon the %anaging Director& %s! 'iang(s $inal statement)!!!))"+ #! Explain the importance o$ the $ ndamental acco nting concepts))))))))!!", -! Assess the $actors .hich might in$l ence the nat re and str ct re o$ acco nting systems o$ %illenni m /td)))))))))))!!))))!!))))))))"0

II. Analyze the management control systems of a business.0

1! 1denti$y the rele2ant components o$ 3 siness ris4)))))!)))))))!!!)!"5 #! Descri3e and e2al ate the control systems in place at %illenni m /td))!!))!!)11 -! Assess the ris4 o$ $ra d .ithin %illenni m /td& and s ggest methods $or pre2ention and detection)))))))))))!!!)))))))))))))))))!!!1-

III.!eferences..."#

A. Introduction
%illenni m /td is a company .hich s pplies electrical components to a 2ariety o$ corporate c stomers! 1t is a strong company .ith -"" strong .or4$orce located in 2ario s parts o$ Asia paci$ic region! Being a m lti national company& ro tine tactical decisions are
decentrali6ed in the 2ario s 3ranches in Asia *aci$ic 7egion& ma8or strategic decisions are

retained at the company(s head 9 arter in Hanoi! :ithin the 3 siness& the acco nting system is 2ery important! Their all records are man al! They are the tools sed 3y the internal acco nts to control all the transaction and the $inancial p rpose a$ter all! And the company plans to impro2e their system sing modern tools li4e so$t.are! The report incl de; E2al ating the e$$ecti2eness o$ acco nting system .ithin the 3 siness& and analy6ing the management control systems o$ the 3 siness!

B. Analysis
I. Evaluate the effectiveness of accounting system within the business! ". The $ur$ose and use of the different accounting records and comment u$on the %anaging &irector' %s. (iang)s final statement.

1.1. Purpose and use of difference accounting records! There are many acco nting records s ch as; p rchase ledger& nominal ledger& p rchase day 3oo4& cash 3oo4 and sale ledger& etc! And each one is sed .ith di$$erent p rpose and $inancial $ield! First is purchase ledger is a ledger that records goods and ser2ices that a 3 siness p rchases on credit! 1n other .ord& the p rchase ledger in acco ntancy contains the personal acco nts o$ s ppliers $rom .hom the 3 siness has 3o ght on credit <the creditors!=! This acco nt deal .ith in2oices recei2ed and consists o$ personal acco nts $or creditors! Using p rchase ledger& the company can 4no. ho. m ch money the organi6ation o.ns its s ppliers and the d ration o$ payments! The payments to the # se! :ithin the 3 siness& sing these records is 2ery important in the

s pplier are made at the end o$ the month $rom the npaid $iles! Cler4 .ill remo2e the npaid in2oices and stamp them *A1D and modi$y the ledger accordingly! 1t records in$ormation s ch as in2oices recei2ed& credit notes recei2ed and payments sent! The $orm o$ p rchase ledger is nder T acco nt and .as $ormerly maintained in 3oo4 $orm& hence the term >ledger>! Purchase day book is the acco nt that simply records all the p rchase transaction o$ the 3 siness! Entries o$ this ledger are made on a day?to?day 3asis& so that the * rchase day 3oo4 .ill pro2ide a complete record o$ all the p rchases made $rom o tside parties! The acco nt can 3e sed in pro2iding data to the important ledger s ch as p rchase ledger and the *@/ acco nt& 3alance sheet acco nt a$ter all! Stock records consist o$ all in$ormation related in .or4ing ? process s ch as; ra. material& $inished goods! All the data o$ them .ill 3e recorded .ith its 9 antity and its 2al e 3y the acco nting or reporting method! F rthermore& it also ena3le the company to control in2entory and monitor the le2el o$ in2entory e$$ecti2ely ! Another acco nting record is nominal ledger! Nominal ledger contains the detailed history o$ all the transactions .hat ha2e 3een processed o2er a speci$ic period o$ time! The ledger is nder do 3le entry $orm and s ally incl des acco nts $or s ch items as c rrent assets& $ixed assets& lia3ilities& re2en e& expense& gains and losses! The nominal ledger& .hich considered as general ledger& is a collection o$ gro p o$ acco nts that s pports the items sho.n in the ma8or $inancial statements li4e trial 3alance& *@/ acco nt and 3alance sheet! 1t helps the company to control all the transaction acc rately and s pport in ma4ing the ma8or $inancial statement! Next is cash book! Cash 3oo4 consists o$ the cash acco nt and the 3an4 acco nt! Cash 3oo4 Anormally will be a debit, credit, and balance record. This record will be debited with remittances received and credited with revolving fund checks drawn B <D'S .e3site&#""5=! The p rpose o$ cash 3oo4 is to help the manager to 4no. the cash sit ation o$ the company& the Cho. the cash is sed in the 3 siness acti2ities and the c rrent sit ation o$ cash! All the transaction .hat se cash to deal .ith .ill 3e record in the cash 3oo4 in the de3it or credit side! The ledger in2ol2e all the necessary in$ormation

s ch as date& the amo nt o$ cast paymentDrecei2ed& the name o$ transaction and the 3alance amo nt o$ cash at the end o$ the $inancial period! Next is sales ledger! AA sales ledger records the sales o$ company has made& the amo nt o$ money .hich company recei2ed $or goods or ser2ices& and the money o.ed at the end o$ each monthB <3 sinesslin4& #""5=! The sales ledger is a se$ l 3 siness planning tool& ena3ling company to monitor and chase slo. payers and see .hich c stomers are most pro$ita3le! E2ery time company in2oices a c stomer& they m st record it in sales ledger! Each month or .ee4& company adds p the total amo nt o$ sales! By recording the amo nts paid 3y c stomers in the sales ledger manage .ill also 3e a3le to identi$y the money o.ed to their 3 siness!

1.2. Comment upon the Managing Director, Ms. Giang s final statement ! A$ter %s! 'iang re2ie.ed the acco nting systems o$ the company& she said that; !too much paper"ork, purchase ledger, stock records, nominal ledger # they are all the same thing surely "e "on t need all of these once "e are computeri$ed%%& Base on her statement& .e can 4no. that she is considering comp teri6ing the acco nting system! She .ants to c t do.n the paper.or4! Eeeping all the transaction record online in the comp teri6ed system& the %illenni m can impro2e the per$ormance o$ the $inancial acti2ities! %s! 'iang also 4no.s that changing the $inancial system is a 3ig determination& in$l ence to the .hole .heel o$ $inancial process! Using comp teri6ed acco nting to replace paper.or4 .ill 3ring $or company 3oth ad2antages and disad2antages; At $irst& there are some ad2antages o$ comp teri6ed acco nting system; Faster and e$$icient in processing o$ in$ormation A tomatic generation o$ acco nting doc ments li4e in2oices& che9 es and statement o$ acco nt %any types o$ se$ l reports can 3e generated $ast and $or management to ma4e decisions

The more acc rate and o38ecti2e acco nting acti2ities is a tomatically done 3y the so$t.are& so it do not allo. the personal $ra d .ithin the acco nting process!

7ed ce the cost o$ maintaining the data& all the doc ment .ill 3e sa2ed online and no hard copy is less needed

And the second& the disad2antages; *o.er $ail re& comp ter 2ir ses and hac4ers are the inherent pro3lems o$ sing comp teri6ed systems can a$$ect serio sly the e$$ecti2eness o$ the .or4 Acco nting so$t.are system not properly set p to meet the re9 irement o$ the 3 siness 1t ta4es time to train the external and internal a ditors to learn ho. to se the ne. comp teri6ed acco nting system and it ca ses the delay in .or4! <Basic college acco nting& #""5= Altho gh the comp teri6ed acco nting still has some disad2antages 3 t it is a good tool $or company control the acco nt in$ormation! Using it& the 2ario s 3oo4 o$ acco nt ha2e 3ecome in2isi3le! So determination sing comp teri6ed o$ %s! 'iang is a good decision in order to red ce damage as .ell as $ra d!

2. E*$lain the im$ortance of the fundamental accounting conce$ts. Acco nting is the lang age o$ 3 siness sed to comm nicate the $inancial data to others! And some $ ndamental concepts are 2ery necessary in order to simpli$y the complicated $inancial in$ormation& ma4e it easy $or the sers! Going Concern concept; Acco nting ass mes that an entity .ill contin e to operate inde$initely! This concept implies that $inancial statements do not represent a company(s .orth i$ its assets .ere to 3e li9 idated& 3 t rather that the assets .ill 3e sed in $ t re operations! This concept also allo.s 3 sinesses to spread the cost o$ an asset o2er its expected se$ l li$e! %illenni m .ants to contin e to do 3 siness on Fietnamese

mar4et 3y retains the company(s head 9 arter in Hanoi! The signi$icance o$ this concept is that the assets o$ the 3 siness are not 2al ed at their A3rea4? pB 2al e& .hich is the amo nt that they .o ld sell $or i$ they .ere sold in small part! 1t is 2ery important to nderstand that the manager needs to ma4e all necessary assessment o$ the company(s a3ility to contin e! 'he accruals concept( AIt requires that revenue and costs are recognized as they are earned or incurred, not as money is received or paid. Income and expenses should be matched with one another, as far as their relationship can be established or justifiably assumed, and dealt with in the profit and loss account of the period to which they relateB <encyclopedia& assessed #""5=! Th s& i$ an item is recogni6ed in a $inancial record or statements all then all the cost that related to generating the income m st 3e recogni6ed& as m st associated in changes in assets and lia3ilities! 1n case o$ %illenni m /td& i$ there are any nsold goods le$t in an acco nting period& the pro$it m st 3e e9 al to re2en e min s the expendit re inc rred in prod cing prod cts! This helps the company to 2al e act al pro$itD re2en e o$ the company in an acco nting period! 'he Consistency concept; This concept is de$ined as AThe same principles for constructing accounts will be maintained from one set of accounts to the nextB <The times 1""& assessed #""5=! The consistency concept stated that similar items are treated in a similar .ay and the same treatment sho ld 3e applied $rom one period to another! The importance o$ this concept $or the company in helping the company is sa2ing cost& times .hen treating the items and in the acco nting period! The managers don(t ha2e to as4 his s 3ordinates .hat and ho. to per$orm the .or4G the employees 8 st do exactly the same! 1$ the company changes the method 3eing sed or the rates 3eing charged& then an explanation o$ the changes and the e$$ects it is ha2ing on the res lts m st 3e sho.n in order to ha2e a timely ad8 stment and pre2ent the company $rom the tro 3lo s position! This is s ita3le $or setting depreciation $rom year to year! 'he concept of prudence; The accounting concept that insists on a realistic view of business activity and stresses that anticipated revenues and profits have no place in a profit and loss account until they have been realized in the form of cash or other assets for ...! <High3eam .e3site& assesses #""5=! This re9 ires the company to choose the most ca tio s presentation o$ 3 siness $inancial sit ation and res lts! This concept is

applied .hen the items is in condition o$ ncertainty to 2al e in cash! The concept o$ pr dence records the items at selling price 3e$ore they ha2e 3een sold .o ld 3e to anticipate a pro$it 3e$ore the pro$it has act ally 3een made! The $oreseen loss and sho ld 3e ta4en into acco nt immediately! This concept is good $or %illenni m Company .hen the item .hich is ncertainty& s ch as stoc4s are drops 3eca se o$ the s dden sl mp in the mar4et& etc! 'he materiality concept( AIt is an expression of the relative significance or importance of a particular matter in the context of the financial statements as a whole. " matter is material if its omission or misstatement would reasonably influence the decisions of a #reader of the accounts$B <the acco ntancy $o ndation limited& assessed #""5=! The a ditors .ill decide .hether a material item sho ld incl de 9 antitati2e or 9 alitati2e e2al ation $or the acco nting .or4! There is no exactly a3sol te meas rement o$ materiality so the e2al ation o$ acco ntant is 2ery important! 1t is easier to sers i$ applying a Cr le o$ th m3( <$or example& to de$ine material items as those .ith 2al e greater than ,I o$ the pro$it disclos re 3y the acco nts=! Ho.e2er& some items exposes in acco nts are regarded as sensiti2e and material errors! The $orm o$ enormo s items m st 3e considered di$$erently& $or example the error o$ assets is not 3e regarded as material .hereas error o$ stoc4 is! This concept helps the company in 2al e material items in case o$ coming o$ eternal a ditors! +. Assess the factors which might influence the nature and structure of accounting systems of %illennium ,td. 1n this case& there are some main $actors .hich might in$l ence the nat re and str ct re o$ acco nting systems o$ %illenni m s ch as; the $inance $ nction and a thority& pro3lem .ith a thority& dangers o$ a .ea4 technostr ct re& the acco ntant(s role and control and ste.ardship $actor! Firstly is the finance function and authority % The str ct re o$ company is $ nctional str ct re .hich di2ided into department; 3 ying department& acco nting department) .ith di$$erent 4ind o$ $ nction& the types o$ a thority .hich exist in %illenni m /td is $ nctional a thority! AF nctional a thority is hy3rid o$ sta$$ a thority& manager or department has the a thority& in certain circ mstances& to direct& design or 0

control acti2ities or proced res o$ another departmentB <Co rse 3oo4& p+5#& #""+=! 1t means that a manager has a thority to re9 ire in$ormation $rom line mangers& s ch as in case that the 3 ying department raises a t.o part pre n m3ered p rchase order& this is a thori6ed 3y the head 3 yer! 'oods are recei2ed 3y the head store4eeper& and the goods recei2ed note is sent to the acco nt department! Besides& the che9 e and statement are passed on to the acco ntant and the managing director $or signing! 1t means that& the a thority in$l ences the str ct re o$ acco nting systems in collecting any in$ormation! Dangers of a "eak techno structure; 1t is the lac4 o$ seniors! The middle line manager may 3e more senior than techno str ct re ad2iserG it may lead to the sit ation that the line managers ignore the order o$ ad2isers or not hearing the experience $rom senior! The other $actors is expert manager may lac4 realism& the technical is going per$ect 3 t the commercial matter is impractical and the last a thority iss e is techno str ct re experts lac4 responsi3ility $or the s ccess o$ the idea! They 8 st gi2e the idea& not concern a3o t the operation to ma4e the ideas s ccess$ lly! %oreo2er& Alegal restrictions s ch as the Companies Act might 3e 3ro4en 3y the line managersB <co rse 3oo4& p +5-& #""+= Problem "ith authority% The techno str ct re can ndermine the line managers( a thority& 3y empire 3 ilding! Sol tion is that clear demarcations o$ line& sta$$& and $ nctional a thority sho ld 3e created! Secondly& expert managers may lac4 realism& going $or technically per$ect& 3 t commercially impractical& sol tions! The sol tion is techno str ct re planners sho ld 3e $ lly a.are o$ operations iss es! Additionally& techno str ct re experts lac4 responsi3ility $or the s ccess o$ their ideas! And the sol tion is they sho ld 3e in2ol2ed in implementing their s ggestions and ta4e responsi3ility $or their s ccess! 'he accountant s role% The $inancial $ nction in a company is one o$ the most important expert roles in an organi6ation! The roles o$ the management acco ntant and $inancial acco nting are techno str ct re roles 3 t are di$$erent! 1n this case& the role o$ acco nts department is recei2ing the p rchase in2oices! 1n here& the p rchase ledger cler4 matches the p rchase in2oices .ith the related goods recei2ed note and enters the details in the p rchase day3oo4 3e$ore $illing the in2oice! So the acco nts department helps company a2oid error in payment! So& the $inancial acco ntant is li4ely to play a direct

role in the operational r nning o$ the 3 siness than the management acco ntant 3 t is cr cial to a company(s e$$ecti2e 3o ndary management .ith shareholders! /astly is control and ste"ardship% The acco nting sta$$(s a thority is generally expressed in proced res and r les!B <co rse 3oo4& p+5,& #""+=! 1n this case& the acco nting sta$$ control a3o t p rchase in2oices& good recei2ed note& che9 e and statement! 1$ the 3alances do not agree the clec4 .rites o t a che9 e $or a ro nd s m amo nt and passes this on $or signing! No attempt is made to reconcile the p rchase ledger 3alances .ith the s pplier statement 3alances! So the control and ste.ardship o$ acco nting sta$$ still has mista4e! A1n many respects& money and $ nds are a 3 siness(s li$e3lood& and monitoring their $lo. is a necessary preca tion! 1$ the $lo. o$ $ nds dries p a 3 siness can $ail 2ery easily! *roper $inancial ens res that the 3 siness is ade9 ately $inanced to meet its o3ligations!B <Co rse 3oo4& p+5,& #""+=! II. Analyze the management control systems of a business ". Identify the relevant com$onents of business risThere are three main types o$ 3 siness ris4 .hich are; operational ris4& $inancial ris4 and compliance ris4! 1n this case& .e can identi$y three types o$ 3 siness ris4 in %illenni m /td! )perational risk% can 3e de$ined 3y the British Ban4ers Association <#""1=; the risk of direct or indirect loss resulting from inadequate or failed internal processes, people or systems or from external events B <Anna& S! C!& S2etlo6ar& T! 7!& Fran4& K! F!& #""0=! 1t means that operational ris4 is the mista4e in the operation process o$ the 3 siness! Lperational ris4 can 3e arises $rom the potential that inade9 ate in$ormation systems& operational pro3lems& 3reaches in internal controls& $ra d or n$oreseen catastrophes! To red ce this 4ind o$ ris4& the management might ma4e a plan in detail and $ollo. it! The policies sho ld 3e created care$ lly in order to red ce the $ra d as .ell as the error or mista4e o$ employees! The reasona3le internal s per2isor might 3e necessary in order $or o3ser2ation and control! 1n case o$ %illenni m /td& the company might $ace to operating ris4! 1n the operational process& p rchases are normally re9 isitioned 3y the head store4eeper .ho

$ills o t a t.o?part p rchase re9 isition $orm! Lne part is sent to the 3 ying department and one part is retained 3y the store4eeper! Di2iding the p rchase re9 isition $orm into # parts then sending one part to the 3 ying department and one part is retained 3y the store4eeper is 9 ite complicate! So d ring the deli2ery process& one part o$ the p rchase re9 isition $orm can 3e lost! Facing to this dangero s sit ation& the company sho ld ha2e the s per2isors to ens re that the deli2ering process has no mista4e! %oreo2er& the copy o$ doc ment sho ld 3e 4ept in 3oth hard $orm and in the comp ter system nder so$t $orm! So the company can ma4e good as .ell as control the mista4e and error easily! Next is financial risk! Financial ris4 is the ris4 o$ incorrect payments or not all receipts 3eing collected! 1t Aco2ers all o$ the ris4s o$ incorrect payments 3eing made or not all d e receipts 3eing collectedB <Co rse 3oo4& p +5J& #""+=! The shareholder .ill 3ear the $inancial ris4 as an additional ris4 .hen the company ses de3t in addition to e9 ity $inancing! 1n this case& .hen s pplier(s statements are recei2ed the p rchase ledger cler4 compares them to the rele2ant p rchase ledger 3alance! 1$ the 3alance agrees the cler4 .rites o t a che9 e $or the rele2ant amo nt and attaches it to statement! The che9 e and statement are passed on to the acco ntant and the managing director $or signing! 1$ the 3alances do not agree& no attempt is made to reconcile the p rchase ledger 3alances .ith the s pplier statement 3alances! The p rchase ledger 3alances and the s pplier statement 3alances .ere not 3een reconciled can lead to the payment might 3e .rong and not correct .ith the p rchase order and the company may $ace $inancial ris4! 1n this sit ation& the external a ditor can 3e hire to chec4 the correction o$ all in2oices and p rchase order! There$ore the mista4e can 3e $o nd in order $or the detail sol tion! %oreo2er& the acco nting manager sho ld also chec4 the acco nt $re9 ently so it helps the company to red ce the $ra d and mista4e in $inancial .or4! The company also needs to se $inancial assessment in order to impro2e the 9 ality o$ $inancial controlling /astly is compliance risk! A1t is the o2erall ris4 that a company .ill not comply .ith all o$ the legal re9 irements laid o t in the Companies Act! Lne 4ey area here is the re9 irement $or the directors o$ a company to 4eep proper acco nting recordsB <co rse 3oo4& p +5J& #""+=! Compliance ris4 can lead to may dangero s circ mstance s ch as red ction in stoc4 mar4et& 3ad rep tation and so on! ANoncompliance may expose the system!

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organi6ation to $ines& ci2il money penalties& legal damages& 2oided or nen$orcea3le contracts& red ced $ranchise 2al e& or re8ected mergers and ac9 isitions <Fed partnership& #""5=! Normally& the 3 ying department raises a t.o part pre n m3ered p rchase order 3 t .hen goods are re9 ired rgently the store4eeper raises the p rchase order himsel$ sing a special three part order .hich is not pre ? n m3ered! Th s& it is not $ollo. the r le o$ company and %illenni m can meet ris4! And in order to red ce this type o$ ris4 .ithin 3 siness& the company need to ma4e the p re policies $ollo.ed the 3 siness la.! All the illegal acti2ities m st 3e p nished strictly! 1$ the company can maintain s ch this p re internal 3 siness en2ironment& they can 3e no longer .orry a3o t the compliance ris4! 2. &escribe and evaluate the control systems in $lace at %illennium ,td. Base on the case o$ %illenni m /td& .e can see that the control systems in company ha2e 3oth the acco nting system and the internal control system! The control en*ironment is one o$ the 4ey components o$ an entity(s internal controlG Ait is the o2erall attit de& a.areness and actions o$ directors and managers regarding internal controls and their importance n the entity! The control en2ironment encompasses the management style& and corporate c lt re and 2al es shared 3y all employees! 1t pro2ides the 3ac4gro nd against .hich the 2ario s other controls are operated!B <Co rse 3oo4& p,"1! #""+=! 1n the %illenni m& the managing director do not control directly& he only get in$ormation $rom managers! The management does not ha2e clear commitment to maintaining and enhancing competence o$ all employees! %oreo2er& in the company do not segregate o$ d ties! Lne person still record and process all stages o$ a transaction! The cash 3oo4 cler4 record all doc ment a3o t in2oice& cash! Store4eeper record a3o t p rchase order and good recei2e note! Next is control procedure! AControl proced res incl de those designed to pre2ent or to detect and correct errorsB <Co rse 3oo4& p,"#&#""+=! Apply in the companyG .e can 4no. that control proced res in there ha2e some mista4es and easy lead to errors or $ra d! %ost o$ doc ment s ch as p rchase in2oices& good recei2e notes are sent to acco nt department& and the other copies are 4ept 3y store4eeper! The managing director signs in the che9 e and statement .itho t chec4ing 3y him! 1$ the 3alances do not agree& no attempt is made to reconcile the p rchase ledger 3alances .ith the s pplier statement

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3alances! Th s& the company lac4 o$ reconciliations stage! They do not compare a special 3alance in the acco nting records .ith another so rce says that 3alance sho ld 3e! 1n the control systems o$ %illenni m also ha2e appro*al and control of document stage! Each doc ment in the company has a standard $ormat sho.ing clearly the re9 ired in$ormation! The copies o$ doc ments are sent to e2ery one .ho needs to 4no. a3o t the e2ent record in the doc ment! The p rchase orders are sent to s pplier and 3 ying department! 'ood recei2e notes are sent to the acco nting department and store4eeper! A3o t pre ?n m3ering o$ doc ments& the pre?n m3ering m st record in most o$ doc ment! 1t help company control the 3 siness! B t .hen goods are re9 ired rgently the store4eeper raises the p rchase order himsel$ sing a special three part order .hich is not pre n m3ered! A%issing n m3er is a se9 ence may indicate that operations ha2e not 3een record or ha2e not 3een processed $ rtherB <Co rse 3oo4& p,"#&#""+=! Th s& the appro2al and control o$ doc ment in the company still has mista4es! 1n the %illenni m /td& most types o$ doc ment are recorded 3y paper and do not ha2e computeri$ed! Systems de2elopment controls are 2ery important! Using comp teri6ed .ill pro2ide $or company many types o$ se$ l reports& a tomatic generation o$ acco nting doc ments& easy to $ind in$ormation& red ce the cost o$ maintaining the data& all the doc ment .ill 3e sa2ed online! Using too m ch paper .or4& the company .ill meet di$$ic lt to control in$ormation and operation! Th s& the company sho ld c t do.n the paper.or4! 1n concl sion& the control system in %illenni m still has some .ea4ness! These .ea4nesses are reason lead to some ris4 $or company s ch as $inancial ris4& operational and compliance ris4! 1n the $ t re& the managers and director sho ld apply some method to change the control systems o$ company& ma4e it 3etter& a2oid the errors and $ra d! 1ntrod cing ne. systems and pdating existing system!

+. Assess the ris- of fraud within %illennium ,td' and suggest methods for $revention and detection

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'i2es an employee responsi3ility& and he may manage the reso rces nder his control dishonestly! 1t is $ra d! AFra d comprises 3oth the se o$ deception to o3tain an n8 st o$ illegal $inancial ad2antage& and intentional misrepresentation 3y management& employees or third parties!B <Co rse 3oo4& p,"+& #""+=! There are many types o$ $ra d s ch as; ghost employees& stealing nclaimed .ages& coll sion .ith external parties& teeming and lading& stealing assets& iss ing $alse credit notes and $ailing to record all sales! 1n this %illenni m& p rchase are normally re9 isitioned 3y the head store4eeper& good are also recei2ed 3y the head store4eeper! 1n this step& coll sion .ith external party $ra d might appear! 1n s ch circ mstances& head store4eeper and s pplier may cooperate to cheat company! They .ill gi2e company .rong in$ormation a3o t goods! A dishonest head store 4eeper may p rchase $rom s pplier 3 t $ail to record the n m3er goods p rchased so that the goods p rchase and goods record in p rchase order are di$$erent! He .ill iss e .rong p rchase order and s pplier iss e .rong deli2ery note! %oreo2er& the cler4 lists all che9 e raised and passes this list to cash 3oo4 cler4 .ho enters the details into the cash 3oo4 .ee4ly and posts the detail to the p rchase and nominal ledgers monthly! The cler4 also re2ie.s the npaid in2oice $ile and attempts to identi$y those in2oices that ha2e 3een paid& .here this is possi3le he remo2es the rele2ant in2oices $rom this $ile& stamps them *A1D and $iles them in a paid in2oice $ile! 1n here& the company can meet iss e $alse credit notes $ra d! The cash 3oo4 cler4 enters the details into the cash 3oo4 and re2ie.s the npaid in2oice $ile& identi$y those in2oices that ha2e 3een paid! Hence& the cler4 can chance to misappropriate payments $rom de3tors or creditors! The cash cler4 also can iss e a credit note .hich is not sent to the c stomer 3 t is recorded in the 3oo4s! 1n $act& ha2e many methods .hich %illenni m can apply $or pre2ention and detection o$ $ra d s ch as; ha2e a good internal control system& contin o s s per2ision o$ all employees& s rprise a dit 2isits and thoro gh personnel proced res! 1n the company& the .or4 o$ all employees m st 3e monitored 3y managers! The act al res lts m st reg larly 3e compared against 3 dgeted res lts! Sometime s rprise a dit 2isits to pre2enting $ra d& special pre2enting teeming and lading $ra d! 1n here& the cashier .ill not 3e a3le to carry o t a teeming and lading $ra d .itho t the ris4 o$ 3eing disco2ered!

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%oreo2er& personal proced res m st 3e ade9 ate to pre2ent the occ rrence o$ $ra ds! :hen $ra d disco2ered& the manager sho ld dismiss the $ra dster! All ne. employees sho ld 3e re9 ired to ade9 ate re$erence $rom their pre2io s employers! *ay le2els sho ld 3e ade9 ate and .or4ing conditions o$ a reasona3le standard! Besides& the company can apply segregation o$ d ties methods! Segregation o$ d ties implies a n m3er o$ people 3eing in2ol2ed in the acco nting process! Hence& it is more di$$ic lt $or $ra d appear! Sincerely& Ng yen Th H ong 1nternal A ditor o$ %illenni m /td

!eferences

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1! B** *ro$essional Ed cation <#""+=! Unit 1" .inancial re$orting& /ondon! #! B** *ro$essional Ed cation <#""+=! Unit 11 .inancial system auditing& /ondon! -! Fran4& :& basic accounting <#""0=& 1SBN "#0-HJ1+50! +! Anna& S! C!& S2etlo6ar& T! 7!& Fran4& K! F!& <#""0= operational risk& Kohn :iley @ Son MonlineN& A2aila3le $rom; http;DD3oo4s!google!com!2nD3oo4sOidPa1* ?tF1pHcC@d9P I##operationalQris4 I##@printsecP$rontco2er@so rceP3l@otsP9HUl/$SNHy@sigP:'1BRm*$gDx0/SC 7RS"n$5oxH3+@hlP2i@eiPcR28S3TaNs#$4U:9T1T:C.@saPS@oiP3oo4Tres lt@ctPr es lt@resn mP,V***1&%1 ,! &rudence concept MonlineN& high3eam .e3site& A2aila3le $rom; http;DD...!high3eam!comDdocD1L10?pr denceconcept!html MAssessed; 1, Lct& #""5N H! 'undamental (oncepts )f "ccounting MonlineN& moneyinstr ctor!com& A2aila3le $rom; http;DD...!moneyinstr ctor!comDlessonDacco ntingconcepts!asp MAccessed; 1, Lct& #""5N 0!&urchase ledger MonlineN& a2aila3le $rom; http;DD...!3 sinesslin4!go2! 4D3dotgDactionDdetailO typeP7ESLU7CES@item1dP1"0-0J5110 MAccessed; 10 Lct& #""5N J! *ales ledger MonlineN& a2aila3le $orm; http;DD...!3 sinesslin4!go2! 4D3dotgDactionDdetailO typeP7ESLU7CES@item1dP1"0-0J511H MAccessed; 10 Lct& #""5N 5! +hat "re The "dvantages "nd ,isadvantages of (omputerized "ccounting *ystems MonlineN& Basis College acco nting .e3site& 7etrie2ed $rom; http;DD3asiccollegeacco nting!comD.hat?are?the?ad2antages?and?disad2antages?o$? comp terised?acco nting?systems?part?#D Massessed 5 Lct #""5N

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