Controls I would expect to find in Bei Nafuu Supermarkets:
1. Plan of Organization
o I would expect to find the supermarket well organized in terms of different departments such as accounting and human resource departments, each with defined responsibility.
o I would expect the shop floor to be organized into different sections where different products are kept e.g. detergents should be kept in one location different from where milk is kept.
o I would expect to find a left luggage deposit area where customers leave their luggage whilst shopping.
2. Segregation of Duties, this refers to assigning duties in processing of transactionsto different individuals such that one person cannot carry out a complete transaction from initiation to final recording in the financial statements without his work being checked by another person.
Duties should be segregated especially within the purchase department. Functions, which should be segregated, include:
(a) Authorization – This should be segregated such that different line managers are given various limits of authority which should depend on such factors such as their position in the organization, their integrity, qualification, competence and remuneration.
Thus, in the purchase department of Bei Nafuu, we expect authority limits to be commensurate with the cost of purchase e.g. the supermarket manager may authorize the purchase of more detergents, but the purchase of a new lorry should come from the board of directors or other senior management.
(b) Execution of duties: – Limits of authority such that a person who authorized a given transaction cannot execute the same. Thus the person authorizing the purchase should not be the one to place the purchase order.
(c) Custody of resultant assets: An official authorizing a given expenditure should not keep the asset arising out of such expenditure. Thus, the person authorizingpurchases should not store the items bought but rather these items should be stored by the store department.
In addition, custody of cash and stock should be in the hands of responsible officials with a high degree of integrity.
Recording: This should be done by a person independent of the above particularly the accounting department. The records should be kept by a person with integrity and responsibility to ensure that records cannot be changed, removed or destroyed.
3) Physical Controls
These aim at limiting access to the companies‘ assets to only authorized persons at authorized times. Thus, Bei Nafuu‘s sensitive items e.g. cash and documents should be kept under lock and key. They should have security guards to provide security to the premises. They should fit fire protection devices in the company.
Any documents used should be pre-numbered and serialized to prevent misplacement of such documents. These documents include local purchase orders; goods received notes, invoices from suppliers and petty cash vouchers among others.
Installation of closed circuit TVs‘ on shop floor. Use of convex mirrors reflecting the customers actions watched by a guard positioned strategically.
4) Arithmetic and Accounting Controls
These are used to check the recording function of an organization to ensure that figures in the financial statements are genuine and authentic. This includes:
2. Periodic reconciliation of accounts e.g. the bank reconciliation, suppliers reconciliation (schedule or ledgers with suppliers statements)
3. Drawing of trial balance
4. Periodic balancing of accounts
5. Regular checking of totals in ledgers and agreeing them to control accounts
5. Use of electronic cash registers at paying point to record cash receipts.
These controls are essential as they provide management with information for decision-making purposes. Such information should be up to date, accurate complete and timely.
5) Personnel Controls
The controls in Bei Nafuu should be operated by qualified and competent personnel with personal integrity who understand the essence of controls.
Some of the responsibilities will call for periodic training and retraining of staff to meet the changing business conditions. The staff should be properly motivated as well.
6) Supervision These include:
a. Low-level supervision – This should be directed to the personnel on the shop floor and should be done by trained and qualified supervisors.
b. Middle level – This should be done by line managers (effectively the branch managers of Bei Nafuu‘s Supermarkets) who ensure that company policies (e.g. of neat supermarket, fast moving queues) are implemented and adhered to. If properly done, it boosts low-level supervision.
c. Managerial supervision and reviews: This will be executed by top management using tools such as budgets, standard costing statements and internal audit feedback
It will also imply that managerial controls include supervisory controls and review to ensure that all other controls and company activities are operating smoothly to achieve predetermined goals.
7) Rotation of duties and vacations
Duties particularly routine duties (such as collecting cash from customers, receiving goods from suppliers) should be rotated to cut continuity of errors and fraud and act as a means of avoiding routine boredom.
More so, staff members should take up their annual leave when it falls due.
8) Routine and automatic checks