Smart Trading IncorporatePrivate Company Smart Trading Incorporated (STI), is a

Question

Smart Trading IncorporatePrivate Company Smart Trading Incorporated (STI), is a subsidiary of Elegance. STI is a securities trading firm specializing in debt and equity securities transactions mostly traded on the NASDAQ. STI is listed on NASDAQ. Also, at the request of their customers, STI will charge a fee to receive or place money transfers from or to accounts all over the world. The minimum fee is $10 for buying or selling stock and $25 for money transfers. The maximum fee is $500,000 for stock transactions and 2% for money transfers. A minimum fee of $100 is also charged for

Explanation / Answer

Situation 1 : Petty Cash Borrowed : Internal Control Weakness

Reason: This item says that custodian has confessed which means he has taken money without information of anyone, i.e he has done theft. This is possible when person recording cash transactions and person having physical custody are same.

Solution : Physical custody of cash and person recording cash transactions shall be different, and at the end of every day balances shall be tallied with each other.

Situation 2 :Account Payable employee: Internal Control Weakness

Reason: Person involve in routine transactions shall not be allowed to do accounting. A dedicated person shall be appointed of Work of accounting. employee working in the account payable department has an opportunity to do fraud as he is the only person maintain account also.

Solution : Allocate the responsibility of accounting to some other person and have a system such as that the work of one person is reviewed by other person.

Situation 3 : Leak of Proprietary information: Internal Control Weakness

Reason : Leak of such information is an major weakness in internal control system, because of this company could have be destroyed in market as competitors would come to know every information about us. This could only be possible because of employees lacking integrity and faithfulness towards organisation.

Solution: Employees shall be told that they are not suppose to share any information to outsider, rather employees shall not be aware of the information as this information is an top secret matter and it shall be limited to management only.

Situation 4 : Customer accounts compromised : Internal control weakness

Reason : Customer information is considered the most precious data in this age of technology, leakage of that data is an major internal control weakness.

Solution: customers information shall be kept at in secured place, if it is in digital form then such data shall be encrypted for the best security of it.

Situation 5 : Clerk Typing mistake : Internal Control Weakness

Reason & Solution: System is not designed properly as the wrong account number must not be accepted by the system at all, if it is done manually then the work of other must be checked by other person like clerk is doing entry, person making bill shall be different from clerk so that the mistake of clerk is found and rectified. However if we consider full year then this mistake was identified in a week's time so it shows internal control strength also.

Situation 6 : Missing Payroll Sheet : Internal Control Weakness

Reason & Solution : Payroll Sheet gets lost is a big mistake on part of employees. This weakness shall be removed by mentioning page numbers like 1 of 72, 2 of 72 etc so that person receiving it comes to know that some page are missing. Or else person sending sheets shall inform person receiving it that total 72 sheets were sent.

Situation 7 : Breakage into information system : Internal Control Weakness

Reason and solution : Having an open access point at an trading branch is an vulnerability to system, also that the wireless access point was purchased without knowledge of expertise person that is the IT team. This can be solved by taking the authority from the office manager to buy any assets without knowledge of the team. Also an approval system shall be placed so that an approval is needed every time anybody wants to buy anything.

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