Amazon Internal Control Analysis

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Internal control is “a process, effected by an entity 's board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives relating to operations, reporting, and compliance.” (COSO). A component of internal control is control activities. The purpose of this paper is to analyze the control activities involved in the sales and collection cycle of an Amazon Prime membership. A flowchart will be provided to help illustrate the activities that occur at Amazon when selling a Prime Membership. The paper will further describe specific risks, controls, and audit procedures that are associated with key processes as well as provide controls that will help mitigate the risks
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These are the risks that will have the greatest adverse effect on achievement of sales collection. A generic scale of high/medium/low was used to rank which risk would cause the most financial impact and to rank each risk 's probability/likelihood.
Abuse of student membership subscription was ranked as a high financial impact. While existing prime members pay $99.00 annually, Amazon student members only pay $49.00. This was also given a high likelihood because all that is needed to be considered an Amazon student is a valid “.edu” email.
The problem of multiple users using a single membership subscription was ranked as a medium financial impact, because Amazon Prime loses the prospect of an additional Prime sale to those who share a single membership. It was also given a high probability because Amazon does not have an adequate control in place to prevent users from sharing their account email and password.
The probable abuse of free trials by using multiple email accounts was ranked as a low financial impact because the free trials last only a month. It was given a medium probability, because people often take advantage of free trials and the only cost to an individual is the time it takes to make multiple emails and Amazon
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They may need multiple credit cards (and of course new email addresses), but a determined person would be able to do this easily. If enough people employ this tactic, Amazon could lose out on a portion of revenue from subscriptions. While there are a number of control procedures Amazon could employ to reduce the number of people committing this type of fraud, it may not be in the company’s best interest to do so.
By looking at Amazon’s Income Statement, its total revenue in 2013 was 74.4 billion dollars. With revenues as high as this, the amount of loss from abuse of the prime free trial would have to be a significantly large amount to warrant a serious response. Amazon is an international company; shipping to over 75 countries around the world. It is not in their best interest to investigate low-loss problems. Until the loss becomes material, it may be best to simply accept this level of

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