Typology Approach
What is the criteria of the framework?
Flow of goods (dominant and scarce)
"Goods leaving the organization without a subsequent corresponding inflow of money" is a risk common to which type of organization
Trade Organization
What is the business model for trade organizations operating under cash sales?
B2C
What is the business model for trade organizations operating under credit sales?
B2B
Online B2C
Typology of organizations is the only way to set up an internal control system
There are two basic approaches to setting up an, internal control system: Process approach and typology approach
Why use this framework? (At least 2 reasons)
- Internal Control (ensure quality of internal control)
- Sees organization as a whole rather than the sum of individual tasks
- creating a model of a complex reality to help us better understand this reality
--> Helps identify risks, the exposures to these risks and the potential controls to mitigate the risks for an organization as a whole
"Storage of goods in a closed warehouse under the custody of a warehouse manager" is a control common to which type of organization
Trade organization
What is the reconciliation formula for the flows of good in cash sales trade organizations?
inventory at t0 + purchases -/- sales = inventory at t1
What is the reconciliation formula for the flows of good in credit sales trade organizations?
inventory at t0 + purchases -/- sales = inventory at t1
Ecological Fallacy is a limitation of the process approach which is why we use the typology approach
False
What are the main processes of the framework?
Purchasing
Inventory
Sales
"Environmental circumstances" is a risk of which type of organization
Production organization: agrarian and extractive organizations
Describe the sales process for a trade organization operating under cash sales
--> Customers visit the store, pick the goods they want to buy and pay the store
Goods sold directly in store, or through direct-payment methods on webshops
Goods are handed over to customer upon payment
Cash received is reconciled with sales record
Describe the sales process of a trade organization operating under credit sales
--> customers do not visit the store and pay at another time than on delivery
Goods are usually ordered through online platform, or direct contact such as a sales representative
After approval of the sales order, goods are handed over to customer
Involves management of accounts receivable to ensure correct payment by customers
Typology of organizations framework distinguishes different types of organizations from an internal control perspective
True.
Because it is based on the value cycle which is a corner stone of internal control
What are the different organizations in the framework?
Trade
Production
Service with limited flow of goods
Service for space and electronic capacity
Service for knowledge and skills
Government + non-proft
"grow plants that are continuously adjusted, use of external yield forecasts and industry ratios" is a control for which type of organization
Production organization: agrarian and extractive organizations
What is the reconciliation formula for the flows of money in cash sales trade organizations?
cash at t0 + cash receipts -/- cash disbursements = cash at t1
accounts payable at t0 + purchases -/- cash disbursements = accounts payable at t1
Describe the purchasing process of a trade organization operating under credit sales
Usually involves negotiation of payment and delivery terms
Purchases typically made on medium or long-term demand
NGOs can sometimes be classified into another category in the typology framework if they offer products and services that are similar in nature to those offered by organizations in other categories in the typology
False
Even if products and services offers are similar in nature to those offered by organizations in other categories in the typology, the relationship between goods or services sold and cash received is non-existent
What is the relationship between the framework and the value cycle?
Coherence between flow of goods and flow of money
What risks do governments and non-profits face? Name 1 control for measure for each risk identified.
Unsatisfactory compliance with procedures, contacts, laws or regulations
What are the necessary administrative and organizational conditions for trade organizations operating under cash sales
IT control
Budgeting systems
Segregation of duties
Management guidelines
What extra step needs to be taken into account for the reconciliation within credit sales organizations?
Account receivable
accounts receivable at t0 + sales -/- cash receipts = accounts receivable at t1
False
Dominant flow of goods = clear measurement points
Scarce flow of goods = less visible measurement points