Chapter 5, Problem 5.5E

To determine

Introduction:

The internal control system of an organization provides a reasonable assurance regarding prevention or timely detection of errors or irregularities which can have material effects on the financial statements. It includes five elements namely control environment, risk assessment, control procedures, monitoring and information and security.

Control Procedures is an important element within internal control which helps to achieve organizational objectives laid down by the management including prevention of fraud. It includes segregation of duties, rotation of responsibilities, mandatory vacations, authorizations, verifications and monitoring activities within organization.

To discuss:

The weaknesses of internal control system that led to thepresence and size of losses.