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In business. the purchasing agent pays bills pertaining to goods purchased for resale and the treasurer pays all other bills. Idaho has several employees responsible for paying bills. Accounting internal controls assure that all transactions are authorized. and they probably are but all businesses must consider an internal controls review when you embark on a new project or make changes to your processes such as centralizing or decentralizing. Reported incidents of fraud and abuse within companies are at an all-time high. Internal control reviews can further help your company achieve its performance and profitability targets. prevent loss of resources. I will discuss weakness and suggestions regarding internal control principles within a few companies’ scenarios. all transactions are recorded.phoenix. you can reduce cash risk with good cash controls through removing opportunity and temptation. The first principle of internal control is “Establishment of Responsibility”. “Control is most effective when only one person is responsible for a given task” myresources. In assessing internal controls for Idaho Company. the purchasing agent is involved in too many transactions and the treasurer records .Implementing a strong financial policy for your business is important in today’s turbulent economic world. This can help ensure that the result meet a company’s goal. it is apparent that this company has much weakness in internal control over cash disbursements. access to assets is allowed only for authorized purposes and accounting records describe only real assets. and promote more reliable financial reporting. We all hope our co-workers and employees are honest.edu Idaho lacks Segregation of duties related activities should be assigned to different individuals. companies are placing renewed emphasis on their internal audit functions. With the passage of the Sarbanes-Oxley Act and related regulatory actions. In the following paragraphs.
prevent loss of resources. In addition. . The documentation procedures lack control in the fact that the check are not numbered or file in a consistent or reliable method between both signers. In review of a current review of internal control within Idaho Company. It would be very difficult to identify an inaccuracies or theft within the company due to the current working procedures within Idaho. • • • Use prenumbered checks in sequence with each having an approved invoice. signers should not have access to the check supply. Alana Davies. Different people should handle cash. There seems to be no independent internal verification within Idaho Company. The check supply should be kept in a locked area. Invest in secured storage for cash and checks and checkwriter equipment. the following recommendations made to your company to achieve its performance and profitability targets.payments and reconciles statements. nobody questions that accuracy or the verification of payment with documents. checks and deposits from those who record them in the books. • • One person should be authorized to sign checks. Create cash procedures that incorporate data collection and review as well as the typical controls such as second person reconciliation. and a person who writes the checks should not have a key to maintain physical control. Below is a memo to Idaho Company with recommendations for improvements to obtain internal control within the business: Ms. record keeping must be separate from physical custody. and promote more reliable financial reporting.
this is a big red flag for concern. Guard Dog shows efficient proof of segregation of duties by assigning different tasks to separate individuals. Lastly. The same employee has served as the secretary for fifteen years with no audits and no errors. only Tom Kimball is responsible for signing checks. There have been no audits in years and the financial committee is sole bearer of all the decision as to the reporting. Guard Dog requires that all checks require proper invoice documentation in which the pre-numbered checks numbers are recorded on the invoice. there is no crossing verifications. . I find much weakness that presents them. Establishment of Responsibility is in that. the treasurer or his assistant. the bank statements and books are reconciled by accounting. Independent Internal verification is performed by having each individuals verified by the next department within the company. The checks are issued by Tom Kimball. The changes made within Guard Dog Company will prove to be a value asset to the company’s success.Your company can reduce cash risk with good cash controls through removing opportunity and temptation by considering the mentioned recommendation. Guard Dog has implemented all principles of internal control. Jane Bell (purchasing) approves an invoice after receiving appropriate or authorization from Dennis Kurt (receiving). and then marked paid. In reviewing internal controls within the church pertaining to the offering collections and the board of Trustees. Mechanical and Electronic controls are met by having all access to check in a secured location in a safe and by using a check writer all check are prenumbered to enhance accuracy and reliability of accounting records. Physical.
• Need at least two people to count the cash in the basement. • Cash goes in safe after being counted and the notation of the amount should be signed by both people there. Suggest financial secretary. Recommendations for the church are as follows: • Recommend periodic audits yearly or bi-yearly. At all times monies should be counted by two people from different groups of the church organization. this would make it easy for any member to retrieve and cash the monies from the church. • Recommend investigating the cost of obtaining fidelity insurance. A check should be issued for all expenditure and a receipt should be recorded.Check should not be made out “to cash”. Only financial secretary has access to safe. Again it depends on the size of the congregation. head usher should not be left alone. This cost must be weighed against the size of the congregation and the amount of potential loss that could be incurred. • Reduce the number of ushers to bare minimum. .
and understanding the cash management process including correct . and the goal should be to prevent fraud and theft before it happens. Reconciliation not done by either head usher or financial secretary • Next morning the financial secretary opens safe and recounts cash before making deposit. A report of reconciliation is sent to the finance committee and copied to the board of trustees. physical handling. separating duties. Can keep out 150 – 200 dollars in cash for expenditures but must notify/send signed note of amount withheld to same person who received the cash count notification in bullet 4 Sec 2 above. proper cash records. Another copy goes to a different person who is responsible for reconciliation.• One copy of the signed notation goes in the safe with the cash. regular oversight and audits. • Financial secretary and person who reconciles the accounts need mandatory vacations Cash security practices are vital for internal cash controls. The proper control involves all the elements we have discussed. • Please no checks made out to cash!!! • Each month the person who received the notifications of cash collected and withheld by the financial secretary receives the statement from the bank to reconcile the accounts.
cash procedures. . Proper control reduces temptation and opportunity and keys to prevention.
References Internal Controls and Cash.edu . 2009 from e-resources at https://axiaecampus.phoenix. retrieved on August 31. Chapter 4.
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