Propensity To Concern Opinions In Australia Essay

Question:

What Is The Propensity To Issue Concern Opinions In Australia?

Answer:

Introduction:

Underneath is the discussion based on different scenarios in case of Mallacota Marina Limited , which leads to lack of internal control on the part of those people who are in charge of management.

Non-collectability of Debts:

There should be proper segregation of duties among the personnels for collection of debts. That referes, that none of the employess can hamper the financial data. The responsibility of collection of debts is in the hands of the book keeper of Mallacota Marina Limited. He is responsible for properl examination and verification of the financial records, so that ensuring that the data aren’t misused. Further confirmation shall be made with the opening debtors balances to check their outstanding balances (Anon., 2017).

Potential Understatement of Revenue:

With respect to Mallacota Marina Limited , the income is earned by selling of yacht. The understatement of revenue shall result in understatement of profit. Futhermore it results in misusing funds on the part of personnels. This is also a factor that reflects the company is misusing the data and financial statements.

Overpayment of overtime to employees:

Over payment of overtime salary to personnels results in mismanagement of employees. It results in excess outflow of cash of the company and will lead to understatement of cash & bank balances, and also shows that the records are not maintained properly. Proper accountability is not being carried out. The internal control system associated with the payment of salary to employess , reflects that the authorised person is careless and should perform his work with care.

Inventory being stolen:

How the stock of goods is being maintained, reflects the internal control of inventory. Proper authentication of stock records , updating the stock register, , authorising the personell who can attend the godown i.e. the place where stock is kept. If the inventory is stolen, it shows the deficiency on the part of the personnel who is responsible for stock keeping. It also shows the possible reason of planned way of stealing the inventory to earn profit. The internal control shows that the goods where not kept under proper survilience (Wang, et al., 2018).

Payments being made twice to the same supplier:

The verification of vendors books and the payments to them shall be performed from time to time. The books of creditors shall be maintained by the management. The suppliers of goods to Mallacota Marina Limited are the Creditors. Its responsibility of maintainance of creditors books lies in the hands of the book keeper. Incase the payments are made twice to the suppliers, then it shows that the books of suppliers are not kept properly. The billing invoices are not stored , stamped and authorized by the responsible person which resulted in double payment to the suppliers. The double payments to the suppliers results in excess outflow of cash of the company and will lead to understatement of cash & bank balances (Delone & Mclean, 2004).

The significant general control weaknesses are listed as follows:

  1. Low security in the Office premises.
  2. No proper authorization of accessibility to the sytem by individuals.
  3. The system analysts did not keep proper documentation of work performed by them.
  4. Unauthorized changes to the FMS due to lack of any access code.
  5. No proper identification for extended periods.

Specific Recommendations to overcome the identified the above mentioned risks are elaborated below:

  1. With regards to the BAS Limited, we obserbed that the system analysts who were fired, could enter the premises and they make changes to the FMS easily. The internal control shows weakness related to the the security of the FMS. We could observe that there is no proper internal control in the premises. Proper accessibility, for example use of PIN to enter the premises, passwards, access cards, scanner, etc. shall be introduced. The employess who has the proper accessibility to the enter the premises, only they can enter. The fired system analysts have been taken away from such accessibility.
  2. The FMS is a repository of organisations confidential data. It should be stored at the place that only few people could have the reach. Therefore, there should be strict accessibility to the storage are where the repository is kept. The fired employees shall be restrained from stepping into the company(Coate & Mitschow, 2017).
  3. We noted that the work performed by the system analysts were done verbally. It is the disadvantage of internal control that did not maintain proper documentation of the system developments. It is the responsibility of the company to not to leave the FMS in free hands of the system analysts by relying on them. This should be not be followed, as they may misuse the data and breach confidentiality.
  4. Monica Nagpal, being the auditor, attaended the IT Department, she changed the FMS Program via a terminal which was was not attended by a programmer and logged on. It is observed that there shall be appropriate identification and there should also be administrator access to the system. No personnel can leave the system by simply logging in. IF the auditor is able to make changes, then it reflects that the employess could also make changes and hence, they have not properly keept the records safely.
  5. In the current scenario, Monica Nagpal, the auditor could enter the premises, access the FMS, made alternations to the data, and was left alone for extended periods. Here, the auditor should have been visited and asked by the authorised employees, of the auditors long stay at the systems place. This should be the sole chargebility of the company to keep the system and data in safe custody and not leave the auditor alone with the FMS. The auditor should not be provided the administrator access to the system(Chron, 2017).

References

Anon., 2017. Explaining auditors’ propensity to issue going-concern opinions in Australia after the global financial crisis. Accunting and Finance, pp. Carson,E;Fargher,N;Zhang,Y;.

Chron, 2017. five-common-features-internal-control-system-business. [Online]
Available at:
[Accessed 07 december 2017].

Coate, C. & Mitschow, M., 2017. Luca Pacioli and the Role of Accounting and Business: Early Lessons in Social Responsibility. s.l.:s.n.

Delone, W. & Mclean, E., 2004. Measuring e-Commerce Success: Applying the DeLone & McLean Information Systems Success Model. International Journal of Electronic Commerce, 9(1).

Wang, Z., Chiu, Y., li, Y. & Hsiao, L., 2018. Performance appraisal for the operation and management of listed and OTC Taiwanese companies with DEA benchmarking models.

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