Reference no: EM132381813

Question

You have been assigned to the audit of a private company, Flowerpot Pty Limited, which operates a plant nursery with a turnover of $6 million a year.

The total number of full-time employees working for the company is 10, together with between three and five casual employees as and when required on weekends. The company is run by a husband-and-wife team who are the directors and shareholders and a full-time accounts clerk, Ellen, who is responsible for all accounting-related tasks including accounts receivable, inventory, payroll and accounts payable.

All accounting functions are performed on a standalone PC that runs purchased software from a software house which specialises in the nursery industry. The access to various applications is controlled by passwords. Ellen records passwords to each application in her top drawer. Backups for all applications are done on a regular basis, appropriately labelled and maintained in a 'backup' case next to the PC.

The office of the company is located in a small office building inside the nursery which is well fenced. The company trades seven days a week but Ellen only works Mondays to Fridays. The office is also used by various other members of the staff to process sales invoices and despatch documents during the weekend.

A monthly income statement and balance sheet are prepared as part of the roll-forward procedure. Monthly reconciliations are also prepared by Ellen for all balances on the balance sheet; however, the directors concentrate their review on the income statement.

REQUIRED

Identify major problems (weaknesses) in the general IT control environment and make realistic and practical recommendations to the owners as to how they can improve the general IT controls for Flowerpot Pty Limited.