Internal Control Concerns
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CASE STUDY 2
ACCOUNTING AND FINANCE MANAGERIAL USE
FI504
To: President John Doe
Date: October 2, 2011
Subject: Internal Control Concerns
Dear Mr. Doe,
I am following up with you in regards to our previous conversation concerning the development and implementation of new internal control procedures that will ensure that the organization is meeting all regulatory and compliance guidelines.
Based on my research, I have discovered several inefficiencies in how the organization handles the following:
Live checks
Petty cash
Accounting/recordkeeping
Privacy
Employee background clearances
In an effort to address all of the aforementioned issues, it is my recommendation that the organization adhere to policies that incorporate the six principles of control activities. These six principles are as follows:
Establishment of Responsibility- This will be accomplished by creating an organizational chart that clearly defines the roles and responsibilities of all the associates within the organization. The role of Accountant and Controller will no longer be performed by one associate.
Segregation of duties- After a thorough review of roles and tasks there will be a realignment of associates to ensure that the same associate that records the assets will no longer be responsible for maintaining the physical custody of that asset ( eg petty cash). Also roles for related activities will be assigned to different associates.
Documentation of procedures- Going forward standard operating procedures will be developed to clearly define and show proof of all financial events that have taken place within the organization. This documentation will include but is not limited to prenumbered documents.
Physical controls- I have enlisted the assistant of IT and Site Security to ensure that there are adequate safety deposit boxes to store petty cash, locked drawers to store inventory and confidential documents, all computers will require pass key access, security cameras will placed in common work areas and associates will be required to use a time clock to check in and out.
Independent internal verification- A quality and control team will be trained in put in place to review 100% of all transactions to ensure accuracy. Annually an outside team of auditor will be brought in to review the financial transactions of the organization.
Human Resource controls- Going