The document discusses inherent limitations of internal control systems at Amazing (Pvt) Limited. It identifies issues like misunderstanding control procedures, human error, and failure to understand or take appropriate action. It recommends strengthening controls by implementing quality information systems, continuous monitoring, clear policies and procedures, and unique usernames/passwords to address Amazing (Pvt) Limited's issues and improve internal controls.

1. Running head: AMAZING (PVT) LIMITED 1
Amazing (Pvt) Limited
Student’s Name
University Affiliation

2. AMAZING (PVT) LIMITED 2
Task 1
Inherent limitations of an internal control system.
Typically, the internal control systems in a company consist of the principles and
guidelines that are put in place to offer equitable assertion that the specific objectives of an
entity are achievable (Arena & Azzone, 2015). However, no matter how strong and convincing
the control systems, it cannot provide maximum assurance that all its objectives will be
achieved. As an alternative, sometimes there are numerous inherent limitations in the system
that tend to reduce the level of reliability of the internal control systems.
Misunderstanding elements of the internal control
One critical weakness of most internal control systems is that it is only useful to those
who understand it and follow its procedures as required. For instance, an entity might have a
policy that all transactions of each day should be completed by the accounting officers before
going home in the evening or leave the entity’s financial statements open on their computers
(Arena & Azzone, 2015). Nevertheless, not all employees might understand that measures of
putting in place by the management should be considered to be of importance to help increase
efficiency in running organizational activities. Some employees in different departments might
misunderstand that the company is too strict on them by giving them directions that all daily
transaction should be closed to facilitate accurate bookkeeping as well as avoiding pilling of
accounting activities. Similarly, misunderstanding is witnessed in this case as it is noted that
the procedure for updating the timesheet system was not documented and not shared well
among all staffs thus leading to erroneous updates (Arena & Azzone, 2015). The latter might
have risen due to misunderstanding elements of the systems stated by the management of the
company.
As such, there is a need for Amazing (Pvt) Limited to train all employees about the
importance to follow the guidelines given by the management to increase compliance with the

3. AMAZING (PVT) LIMITED 3
internal control system to improve performance (Arwinge, 2015). In doing so, the management
of the company should also emphasize the reasons for having robust internal control systems
as well as the possible consequences that may arise of failing to adhere to them.
Human error and misjudgment
Usually, training of employees aims at improving their efficiency to enable them to
perform tasks assigned to the perfectly. However, even if they are well trained, human
judgment can continue to happen among employees, thus leading noncompliance with the
internal control systems of the company (Arwinge, 2015). For instance, in the cases of Amazing
(Pvt) Limited, there are no checks between the authorized copies and what is keyed into the
system which might have risen due to employees judgment of not to follow the procedures of
the company. For the management to eliminate such issues, all employees dealing should be
supervised frequently to ensure that they do what is expected of them to encourage adherence
to internal control systems.
Failure to understand or take appropriate action
Another inherent limitation of the internal control systems is failing to take measures
that could help to prevent occurrences of adverse effects in an organization. In some instance,
ineffectiveness occurs in an organization because some employees fail to understand how
internal control systems run (Bragg, 2015). For example in the case of Amazing (Pvt) Limited,
failing to update, document and disseminate of the timesheet system to al staffs may arise
because employees in charge of performing such activities do not understand the internal con
trolls system to enable them to take appropriate actions.

4. AMAZING (PVT) LIMITED 4
Task 2
Recommendation of internal controls systems for Amazing (Pvt) Limited
Typically, internal controls systems are designed and put in place in an organization to
prevent and detect errors and frauds among employees assigned accounting tasks. Even though
companies set appropriate internal controls, some employees do not adhere to such guidelines
while performing their duties as witnessed in the case of Amazing (Pvt) Limited (Taylor, 2018).
For the management of the company to avoid occurrence that is with at Amazing (Pvt) Limited,
the following internal controls should be appropriately put in place.
First, the management of Amazing (Pvt) Limited should employ appropriate quality
information and effective communication systems in all departments. Adoption of quality and
sufficient information and technology components in different departments will help to ensure
updating of the timesheet system to ensure that all financial transactions are well documented
and communicated to accounting staffs who used them as guidelines while performing their
duties (Taylor, 2018).
Secondly, the management of Amazing (Pvt) Limited should ensure continuous
monitoring and evaluation of all activities to assess if all tasks assigned to accounting
professionals are performed appropriately to encourage conformity with the Financial
Reporting and Accounting guidelines (Hilton & Platt, 2015). Frequent monitoring of
accounting activities will help to eliminate cases such as approval of time sheets and failing to
enter them into the system, which can encourage manipulation of the accounting information.
Therefore, the adoption of continuous monitoring and evaluation of activities will help ensure
that all operations are performed according to accounting standard board guidelines.
Adoption of appropriate policies and procedure is also another essential control system
that is very vital in this case. Implementation of methods and strategies will give chronological
ways of how activities should be done (Hilton & Platt, 2015). It will also ensure that all

5. AMAZING (PVT) LIMITED 5
accounting activities are performed sequentially to make sure that all steps are incorporated to
eliminate errors and frauds by accounting staff. In the case of Amazing (Pvt) Limited, policies,
and procedure will help to ensure that all cheques entered in the system are authorized and are
authentic.
Lastly, the setting of unique usernames and strong passwords should always be
considered by any company to protect sensitive data from unauthorized accessed by strangers
(Aicpa, 2019). As in the case of Amazing (Pvt) Limited, setting strong passwords to
confidential accounting information will help to prevent unauthorized access of valuable
knowledge that requires specific staffs. Also, this will help to have different passwords for
employees at various levels in the organization to ensure that employees only access
information which is under their control.
Conclusively, internal control systems perform an integral function in any organization
to ensure that accounting staffs perform their duties according to accounting standard
guidelines. Similarly, the management Amazing (Pvt) Limited should put in place appropriate
internal contralto systems to eliminate the occurrence of such issues that were witnessed.

6. AMAZING (PVT) LIMITED 6
References
Aicpa. (2019). Property And Liability Insurance Entities, 2018. S.L.: American Institute Of
Cer.
Arena, M., & Azzone, G. (2015). Identifying organizational drivers of internal audit
effectiveness. International Journal of Auditing, 13(1), 43-60.
Arwinge, O. (2015). Internal control: A study of concept and themes. Pearson Education, Inc.
Bragg, S. M. (2015). GAAP guidebook. Centennial, Colorado: AccountingTools, Inc.
Bragg, S. M. (2016). Cost accounting fundamentals. Colorado, CO: Accounting Tools.
Cohen, J. R., & Simnett, R. (2014). CSR and assurance services: A research agenda. Auditing:
A Journal of Practice & Theory, 34(1), 59-74.
Graham, L. (2015). Internal control audit and compliance: Documentation and testing under
the new COSO framework.
Hilton, R. W., & Platt, D. E. (2015). Managerial accounting: creating value in a dynamic
business environment. McGraw-Hill Education.
Taylor, J. (2018). Quality assurance of chemical measurements. Routledge.