under question number 3, our team identified a list of processes of the TM Group and controls that
should be tested
first I talk about the reporting process. Under this we focused on financial reporting as well as
administrative reporting issues related to controls, and also we focused significance of such controls and
impact of the failure of such controls.
We identified the following vulnerabilities related to the reporting process
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TM directors instructed the accounts department not to consolidate GC’s accounts when
preparing the Group’s financial statements.
Lack of limitations in accessing TM’s accounts.
No written evidence & records for the loan obtained form a director.
no proper record of the of the meeting minutes because company did not have a secretary
therefore controls of reporting process we should be test through Arithmetical and accounting control
and Segregation of duties. under these controls, we can minimize errors and frauds by accurately
reporting all company information.
If TM group fail to maintain those controls successfully, they will face the following impact , they are
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Inability to prove what was discussed in meetings.
Receipts, payments recorded incorrectly.
Stock surpluses & shortages
Stolen
Unauthorized payments
now I talk about the HR management process. This is more important to encourage employees to
minimize unexpected employee turnover, build HR policies and supporting structure.
But TM group HRM is weak. Because they haven’t structured system therefore TM group faced
Unexpectedly high employee turnover. therefore controls of human resource management process we
should be test through personal control ,supervision & authorization control.
If TM group fail to maintain those controls successfully, they will face
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high employee turnover
Increase employee training cost
Low employee morale
Increase in salary costs is due to the recruitment of temporary employees
Inventory management, quality checking & customer compliant management processes also should be
tested. Because those processes in TM group have poor controls.
GC is manufacturing company of toys on behalf of the TM company. Therefore, their main business
material is inventory. Although these two companies have integrated their stock management systems,
they don't have proper inventory planning within each company. For example one of TM’s junior staff
stole three boxes of “Super Hero” sixth-generation toy gun .
Therefore inventory management system is very important TM group because This help to supplier
selection, placing orders within budgetary control limits, receiving delivery of the goods and paying for
them. therefore TM group should be use Authorization and approval control / Physical control/
accessing control for manage the inventory effectively . if not they will face,
 The supplier submits an invoice for an incorrect amount, or for goods that have not been delivered
 Supplier invoice is paid even though the invoice details are incorrect (due to fraud or error)
 The supplier may deliver more goods or less goods than ordered
Also quality checking & customer compliant management processes very important because This will
enable to improve the product through customer feedback, minimize legal issues through relationships
and protect the company's reputation.TM group Super Hero gun laser hurt child eyes ,& they have no
risk management policies. Therefore they failed to maintain control they will face
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Customers are frustrated with the company
Reputation breakdown
Incur additional legal costs.
Failure to develop products to suit the needs of the target market
Through the well management and supervision we can mitigate those impact.
TM group Payroll process have some weak point . for example warehouse staff not required to submit
the original receipts for transportation and meal expenses claims .under these circumstances ,
misconduct can occur from employees. Therefore use the Arithmetical and accounting control whereas
Authorization and approval control through we can minimize those failures related to payroll process.
Thus payroll management is very useful for TM group because it help to ensure that under-payments
and over-payments of wages and salaries are avoided and minimize related risks.
Another one is online platforms (website, FB) management process .this is very important for modern
business . because the use of the internet and social media will enable the company to increase its
sales and reputation as well as effective its operations.
TM’s online platforms (website, FB) management process also have some drawbacks. For example
 clerk buzz used the TM company website & sale unauthorized toys through company website.
 TM did not have a whistle-blowing policy
 hotline member rex shared it on TM’s public gossip page on a social media website.
Under supervision controls we can avoid these drawbacks .if not company will face
 Selling other goods under the company name through the company website.
 Posting things that could damage the company's reputation on social media.
Fixed asset management process is very significant for business. because it Focuses on minimizing the
risks associated with fixed asset transactions subject to the approval of the relevant parties and through
legal documents. (CAPEX budget , register, authorization form) . using Authorization and approval
control we can avoid and mitigate fixed asset related failures. Further details on fixed asset
management process are discussed under question 4.