Internal control system is considered to be integral for business where it is being undertaken with the motive to ensure that risks associated with the enterprise can be managed easily. This system comprises whole network of systems which is being developed with the organization in order to provide assurance that all the main goals of the business can be accomplished efficiently. It also undertakes plans and procedures in order to ensure that company objectives are met and on the basis of same future plans are made. The present study is based on Lakeside limited which highlights the internal system of business along with the payroll system.
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Importance of sound internal control system
For every type of business it is must to have sound internal control system where presence of effective systems within Lakeside limited can reduce risk of asset loss and assist in ensuring that plan information is complete along with accurate (The importance of internal control., 2010). Further, this system is regarded to be most crucial in financial reporting. Moreover, the range of crucial areas which are covered in this type of system involves prevention of fraud, its detection and protection intangible along with tangible resources. Lakeside limited can easily segregate duties in case if its system is quite effective and in turn accomplishing organization goals become easy for the business. Further, it is well known fact that in every type of business some risks are largely associated and in order to deal with them in proper manner it is must to have strong internal control system (NARAYANASWAMY, 2014).
Letter of weakness
The Director, Lakeside limited
Date: 26thNov 2016
Subject: Weaknesses in purchase and payroll system
After analyzing the entire purchase and payroll system of the business many weaknesses have been identified which is having adverse impact on the business. Factory staff are paid salary in cash form and the wage system totally relies of clock card. So, sometime it is possible that wages to people are not paid as per the actual work done by the employee. Another weakness is that SAGE payroll system is employed within the workplace where other forms of systems are also present which business can undertake for improvement purpose.Apart from this, in case of purchase system the entire transactions are carried out manually where no advanced system such as IT is being employed for recording monetary transactions. Moreover, line manager of every department places their own order which can also act as main weakness. So, some improvement can be done in the existing process of purchasing and payroll system where IT system can be used for recording financial transaction such as purchase etc. For payroll system continuous audit can be carried out and development of transparent payroll policy can be advantageous for business (4 tips to improve payroll effectiveness., 2014).
On the basis of entire study it has been witnessed that purchase and payroll system of Lakeside limited is not appropriate and it requires improvement. Further, development of internal control system can bring fruitful results for company such as different type of risks can be tackled easily.
Books and journals
- NARAYANASWAMY, R., 2014. FINANCIAL ACCOUNTING: A Managerial Perspective. 5thed. PHI Learning Pvt. Ltd.