Hardware Strengths And Weaknesses

Internal control is very important for any company, but it is especially important for small companies. Small companies sometimes have situations where fewer employees are given many jobs, which can lead to fraud. Internal control is beneficial to companies such as H & R Hardware because it can help keep fraud out of the company. In the company H & R Hardware, there are a few things that could be considered internal control strengths. One strength is that the owner of H & R Hardware, David, likes to socialize and gather with his employees. This can lead to good working relationships, which can improve the loyalty of the employees to the company. Because of this, the employees are more likely to put their best efforts into the company and

All of the employees know each other and they have a very specific and loyal customer base. Although all of these are great characteristics of a company, it can also be detrimental because when employers and employees become so close and trust each other too much they can lose sight of the purpose of the company. This trust can be blinding to employers and make them think that their employees are too loyal to commit fraud. This is an internal control weakness because the employer, such as David, might be tempted to not monitor his employees closely, which in turn can lead to fraud. Another weakness is that David does not have formalized policies and procedures set up in his company, and the code of ethics has not been discussed in fifteen years. When the employees are forced to play a guessing game at the rules and regulations, it can be harmful to the company. Also, the employees do not have formal job descriptions. This again, leads to employees questioning what is expected from them. The final and most prominent internal control weakness in H & R Hardware is that one person has too much responsibility. John Batson takes care of the accounting, he opens the mail, posts accounts receivable, handles accounts payable, makes deposits and is in charge of payroll. When one person has many important jobs like John does, it provides him with more motive and more opportunity to commit fraud. Because John is in