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Internal Control Cases: Bern Fly Rod Company

Bern Fly Rod Company is experiencing internal control issues related to its cash disbursement processes. There are no checks to verify the accuracy of sales staff travel expense reimbursements being claimed, and expenses are rising over time without corresponding revenue increases. To address these issues, Bern Fly Rod should establish a department to track and verify voucher information for sales and expenses. It should also audit product order compliance to reduce returns and only pay sales staff after confirming orders. Implementing these preventive measures around cash management would strengthen the company's internal controls.

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Trixie Jane Bautista Leyma
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150 views2 pages

Internal Control Cases: Bern Fly Rod Company

Bern Fly Rod Company is experiencing internal control issues related to its cash disbursement processes. There are no checks to verify the accuracy of sales staff travel expense reimbursements being claimed, and expenses are rising over time without corresponding revenue increases. To address these issues, Bern Fly Rod should establish a department to track and verify voucher information for sales and expenses. It should also audit product order compliance to reduce returns and only pay sales staff after confirming orders. Implementing these preventive measures around cash management would strengthen the company's internal controls.

Uploaded by

Trixie Jane Bautista Leyma
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Leyma, Trixie Jane B.

BSMA 2202

Internal Control Cases


Bern Fly Rod Company
Required

Analyze Bern's situation and assess any potential internal control issues and exposures.
Discuss some preventive measures this firm may wish to implement.

Potential Internal Control Issues and Exposures

Any company's internal control system must primarily consist of policies, processes, and
procedures that must be followed by the organization in order to accomplish the following
primary objectives. The cash disbursement mechanism has problems with accountability,
according to the issues that have been found in Bern Fly Rod's internal control system.The
reimbursement of travel costs incurred by the sales force has no check and balance as to
whether those expenses were incurred by the sales staff or not. In comparison to the previous
months, the amount of travel expenses paid is rising with the passage of time. The company's
financial statements indicate that revenues have increased.The company's earnings have not
increased as a result of rising product return costs and rising expenses. This problem arose
solely as a result of the company's lack of a proper cash disbursement scheme.

Preventive Measures

Bern Fly Rod Company needs to make changes to its cash management scheme. A proper
department must be established to track the transparency of the vouchers that employees fill
out about product sales and travel expenses incurred for the company. The order's compliance
must be thoroughly examined in order to minimize consumer product returns. The sales force's
remuneration must not be charged directly until they confirm the order placement. The
introduction of these preventive measures to the company's internal control system would
improve the company's performance. A company's cash disbursement scheme is one of the
most important aspects of its activities and asset management of that company.

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