CHAPTER 20

10. THE PURPOSE OF ORGANISATIONAL CONTROL

~safeguard company's assets - if assets are stolen or damaged, the company will have to spend money to replace them
~ efficiency - inefficient business practices are a waste of the company's money
~ prevent fraud - fraud means the loss of valuable resources belonging to the company/shareholders
~ prevent errors - errors can lead to losses in efficiency or a loss of assets

11. WHY CONTROLS IN SYSTEMS ARE IMPORTANT

Purchasing
~ Safeguard company's assets - ensuring that only goods that have been received are paid for and the goods are in good condition
~ Efficiency - ensuring the best price is negotiated before buying
~ Prevent fraud - preventing purchasing staff accepting payments from suppliers to persuade them to purchase from that supplier
~ Prevent errors - ensuring the correct amount is charged by suppliers and that all purchases are recorded

Sales
~ Safeguard company's assets - ensuring good are only sold to customers who are likely to pay
~ Efficiency - ensuring orders are processed promptly
~ Prevent fraud - ensuring there is no theft od cash from customers
~ Prevent errors - ensuring the correct quantity of goods is despatched and invoiced

Wages
~ Safeguard company's assets - ensuring that cash wages cannot be stolen
~ Efficiency - ensuring that people are only paid for overtime when necessary
~ Prevent fraud - ensuring that there are no 'ghost' employees

Cash
~ Safeguard company's assets - ensuring cash is kept safe from theft
~ Efficiency - ensuring cash is banked promptly so as to gain interest
~ Prevent fraud - ensuring employees do not claim for expenses not incurred
~ Prevent errors - ensuring the entries in th cash book are correct

Inventory
~ Safeguard company's assets - ensuring inventory is kept free from damage
~ Efficiency - ensuring inventory is only produced when it can be sold quickly
~ Prevent fraud - ensuring inventory cannot be stolen from employees
~ Prevent errors - ensuring costs of finished goods are calculated properly