Flow Chart Suggestions
The flow chart lacks some key procedures. Procedures for handling credit approval need revision. Approval for estimates and not the billable sales dollars is not correct. The billable sales amount is the correct way to approve credit sales. Refining this procedure may reduce billing errors.
Other items that require attention include; the sales checks are not secure. Securing the sales checks and restricting access may help to decrease attempts at fraud. Errors are happening in the shipping department regarding mathematical errors in extensions on invoices. Tightening standard procedures for corrections on sales invoices may reduce total credit memos to customers.
Serious concerns exist regarding the company and its financial statements. According to the Apollo Shoes, Incorporated’s Board of Directors’ meeting minutes, personal loans to executives of the company with generous interest rates and long repayment terms exist. The existence of the loans may raise the risk of fraud regarding the financial statements.
No controls exist to prevent loans regarding personal loans to executives of the company. A gross violation of generally accepted accounting principles casts doubt about the validity of the financial statements.
Conflicts of interest are also present in the form of a director offering to install computer equipment. The installation of the equipment requires an independent contractor to avoid any possible security risks.
The company is failing to match expenses and expenses, for example, dividends require declaration in the same year. This follows the matching principle of revenues and expenses. The failure to install machinery in the purchase year is another violation. Machinery costs, including installation are depreciated according to service life. Computations regarding depreciation expenses may be incorrect. The possible error in depreciation casts doubt on the validity of net income for the entity.
Internal...