1. Excerpt from a consultant’s report for one of my clients:
Conclusion:
The accounting department is functioning well enough to meet and satisfy the business needs
of the company but management is fully aware that there are cracks seeping through the system
and weak or lack of controls in the system’s nooks and crannies. Danger lurks in a system that
gives the semblance of a fully functional, effective and adequate system but masks weaknesses
that the sinister can exploit for personal gain. It is the kind of system where fraud and
irregularities spawn, multiply, and fester. The transition to SAP system may very well bury all
traces and vestiges of any evidence of fraud and irregularity, providing the perfect getaway for
its perpetuators if there are any. I am not saying categorically stating that fraud and irregularity
has been committed but neither can I rule it out.
Only an audit conducted for such purpose can render an opinion providing reasonable assurance
that fraud and irregularity do or do not exist. I know that I have recommended that a financial
statement audit be conducted only after the full SAP systemis fullyimplemented and operational
but under these circumstances, another kind of audit is warranted. It will be an audit conducted
solely for the purpose of determining whether fraud and irregularity have indeed been
committed. It will give the shareholders the peace of mind that they need and deserve, knowing
that their hard earned money is not being siphoned off by thieves resorting to illegal means and
taking aquick and fastroad to richness.Even ifthe audit turns out to be a hunt for empty treasure
in terms of detecting fraud and irregularity, findings and recommendations in strengthening and
instituting controls that can be carried over to the SAP system will be adopted. The SAP system
has built in controls and will not require the aid of an audit for instituting proper and adequate
controls.
The accounting department has a long way to go in terms of improving and refining its policies,
procedures, and practices in bookkeeping and financial statement preparation. The transition to
SAP is a giant step in the right direction but it will not cure the deficiencies in adhering to
appropriate procedures, utilizing book of accounts, filing and maintaining supporting documents,
and adopting good and acceptable accounting practices. The accounting department needs to
shed bad habits and dispense with poor accounting practices such as reconstruction of fs
accounts and perfect and master the double entry system to be able to obtain the maximum
benefit from the SAP system. Accounting personnel with lack of education, training, and
experience in accounting must compensate for this by developing the skills and acquiring the
necessaryknowledge to be able to excelat their jobs. The HR department must resolve to recruit,
screen, and hire qualified candidates to ensure that these new hires will be able to contribute
valuable service to the company. Management for its part should consider imposing interest
charges, offering trade discount terms, factoring, and organizing itself and its competitors as an

2. association to neutralize or mitigate the dominant advantages of its clients. The organization
should adopt a budget system to put its finances in order and optimally utilize its assets to be
able to get maximum returns and create value for its stockholders. If the company will be able to
formulate sustainableand effective strategies,improve its financialmanagement and accounting
systems, and adopt best business practices, it will be a formidable and highly successful
enterprise for decades to come.