Authority limits are clearly defined in writing and communicated throughout the department.
Accounts are reconciled on a timely basis to their underlying source data.
Equipment, supplies, inventory, cash and other assets are physically secured and periodically counted and compared to records.
Department policies are documented and reviewed periodically for current processes. In addition, policies are effectively communicated to all department staff.
Department management closely monitors department operating statistics or other benchmarks. Negative trends are identified and addressed promptly.
Examples of weak internal of controls:
Inaccurate Financial Statements
If an organization discovers there are inaccuracies in its financial statements, there might be a problem with the organization's internal control system. One basic fundamental of internal controls is the principle of separation of duties. This means that different employees handle different areas of the accounting duties. If the same person handles all duties, it is a sign of a weak internal control system. If inaccuracies occur in the financial reporting, a company should look into the accounting procedures it uses.
If a company cannot find certain documents, such as invoices or purchase orders, this might be another sign of weak controls. An organization develops procedures for recording, posting and filing documentations. If a document is lost, there is a good chance that there are problems in the company's processes. If one employee has too much control, he may manipulate documentation to deceive the company.
Jun 20th, 2014
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