INTERNAL CONTROL
During the past year, Howard Industries has experienced excessive employee turnover in their IT function. Exit interviews with employees revealed that they were dissatisfied with the working environment. Howard employed the services of a management consulting firm that had expertise in employee relationship management. The consulting firm made recommendation to restructure IT operations to create a greater sense of “ownership” among the IT staff. After three months, under the new operation a survey indicated a marked increase in the level of job satisfaction among the IT group.
During the conduct of the audit planning phase of the annual financial audit, the auditor observed the following practices: Individual IT professionals are assigned exclusively to support specific business functions such as sales processing, billing, customer account maintenance, etc. Each professional provides a range of IT services for their respective users including computer operations, program changes, and documenting the system through record layouts, system flowcharts, and program listings. They also reconcile computer output reports and logs of transactions errors.
Required
a. Identify and explain any control concerns you have with the new operations.
b. What potential computer fraud might this operational approach permit?
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