- 9 Marks
AA – May 2016 – L2 – Q7b – Risk Assessment and Internal Control
Identify business risks for Moovy Magic’s procurement and suggest control strategies.
Question
You are the internal auditor of Moovy Magic Limited, which runs a chain of video rental stores.
The company guarantees that if a video is not available for rental, the customer will get a free rental when that video comes back into inventory. It is not possible for customers to pre-book videos. The company purchases a number of copies of each video, taking the above policy into account, but has no way of monitoring whether their procurement strategy is effective. Procurement decisions are made and auctioned locally, and no central budgets are produced.
You have been asked by the directors to review the procurement and other strategies of the company.
Required:
Identify and explain the potential business risks arising from the above procurement and other strategies. Suggest controls and strategies that the management of Moovy Magic could instigate to mitigate those business risks. (9 Marks)
Find Related Questions by Tags, levels, etc.
- Tags: Business Risks, Internal Controls, Mitigation Strategies, Procurement, Video Rental
- Level: Level 2
- Topic: Risk Assessment and Internal Control
- Series: MAY 2016