The reasons for internal control weakness at Jonathan LLC

This is an assignment that focuses on the reasons for internal control weakness at Jonathan LLC. The paper also investigates the actions to improve the existing internal control system.

The reasons for internal control weakness at Jonathan LLC

Jonathan LLC

Mr.Paul was working as senior accountant of Jonathan LLC for the last five years. Two month before Mr.Paul has given resignation and agreed to work for three months until the management finds a suitable replacement for his position. The accounts department consists of 5 employees including Mr.Paul at present. The assistant accountant has been given signing authority of supplier cheques and some of the functions of senior accountant also assigned to him.

It has been noted that large amount of outstanding for the suppliers were pending and few of the suppliers have stop supplying goods to Jonathan LLC from last month. The credit period was extended to customers to improve the sales and most of the customers have not settled the dues on time. Few of the customers are disappearing and unable to find them in the market. The assistant accountant is suggesting to the management that to meet the temporary financial difficulties,

Jonathan LLC should approach the bank for additional overdraft facilities to overcome the cash-flow difficulties.
Managing director is to appoint an internal auditor to find out the reasons for present financial difficulties. Additionally, to rectify weakness in record maintenance by the staff in finance department.  He further comments that the computer system installation many years ago is not supporting increasing number of transactions in present times.

The reasons for internal control weakness at Jonathan LLC

In the meantime, the managing director has informed the assistant accountant that there is a new project. The new project is going to be award to Jonathan LLC in three months’ time. There is an immediate fund requirement is RO 1,000,000. The assistant accountant to evaluate the options available for raising funds to meet the financial obligation of Jonathan LLC.
You have been appoint as senior accountant to Jonathan LLC. Also, you are to function from the next month to take over many tasks handed over to the assistant accountant.

You are to prepare a report to the managing director. The report is to address the following two concerns raised by the managing director.

Task 1
The reason for the internal control weaknesses. Also, what are the actions that you can proposed to the management improve the existing internal control system. You also need to state what are the consequence of having weak internal control system in the organization. (Your report should support proper explanations with reasonable number of examples).      (Marks 10)

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