Accounts Notes: REVIEW OF SYSTEMS AND PROCEDURES

Friday 25 March 2011

REVIEW OF SYSTEMS AND PROCEDURES

Systems – System is defined as a set interrelated components which work together to accomplish a common objectives.
Procedures – Procedures are the means by which policies are implemented. Procedures entail the use of documents in accordance with precise instructions or methods to be used. Standard procedures facilitate control of business operations.
Review of Systems and Procedures – The review of systems and procedures is undertaken to improve the methods, to get away from the old ways and traditional routines and to reduce the cost in completing the processing the paper work – eliminating waste, duplication and inefficiencies.
The important thing in the evaluation of systems and procedures is to make sure that they are designed to produce the desired results in the context of activities / operation of the organization. All deviations must be called to the attention of different levels of management depending upon the importance of seriousness of deviations.
The evaluation of a system or procedure actually includes three separate considerations. First, is the system of procedure meeting all of the current requirements ? Second, is it operating effectively ? and third, what is the degree of effectiveness ? To determine whether a system or procedure is meeting current requirements, the following among other things, should be considered :
i. Is the system or procedure designed to promote achievement of the company’s objectives, and is it accomplished effectively ?
ii. Does the system or procedure operate within the framework of the organizational structure?
iii. Does the system or procedure adequately provide methods of control in order to obtain maximum performance with the least expenditure of time and effort ?
iv. Do the routines designated in the system or procedure indicate performance in logical sequence ?
v. Does the system or procedure provide the means for effective coordination between one department and another ?
vi. Have all required functions been established ?
vii. Has the necessary authority been designated to carry out responsibilities ?
viii. Can any changes be made to improve effectiveness ?

Management Audit Questionnaire

Manufacturing including
Purchasing function Marketing Personnel
(i) Manufacturing overview
(ii) Production planning
(iii) Production
(iv) Inventory
(v) Purchasing (i) Marketing overview
(ii) Sales
(iii) Mark of research
(iv) Advertising
(v) Physical Distribution (i) Personnel overview
(ii) Manpower planning
(iii) Industrial Relations

For each of sub heads following points must be mentioned:
(a) Long-range plans
(b) Short or medium range plans
(c) Organizational structure
(d) Leadership
(e) Communication
(f) Control.