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Appendix 2

Which of the following are likely to be reasons that embedding the
principles of internal controls in HH’s culture will be difficult? Select all
that apply.

A The CEO blames management for the lap top theft.

B Q blames P for increased machine breakdowns.

C There is a lack of leadership from the CEO with regards to internal
controls.

D Controls have not been updated for several years and so are not fit for
purpose.

E Staff are under pressure to cut costs and internal controls are expensive.

18 Mr Ya owns a new accountancy business employing twenty five staff. These
employees manage their own workloads and client base with minimal help or
guidance from Mr Ya. They are highly skilled and able to operate completely
independently of each other and Mr Ya.

Recently, a client came to Mr Ya with a query about one of the staff and Mr Ya
was unable to help since he knew so little about that particular staff member’s
method of working. He is now concerned that his ‘hands off’ management style
means he knows too little about the activities of his staff. He has realised that
he is completely unable to pick up incidences of under-performance or
demotivation until they are reported by clients.

He wishes to implement some standard internal controls to enable him to keep
track of his staff and their work. Eventually he would like these to become
embedded in the organisation.

Which of the following will be limitations to the effectiveness of any
controls he puts in place? Select all that apply.

A Internal controls can only be used to prevent financial fraud and error.

B Internal controls will add to workloads and so slow down the work of the
consultancy in the longer term.

C Standard internal controls will not work given the independence of the
staff.

D Staff may be demotivated by the implementation of internal controls.

E Staff members may forget to comply with the controls or override them on
purpose.

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