Brian D. Cox
1) In its annual report, the Company must report on internal controls over its financial reporting. Four key elements must be included in this report: * Statement of Responsibility by Company Management (the CEO and CFO) for establishing and maintaining an adequate internal control structure and procedures for financial reporting. * Statement identifying the framework used by management to evaluate the effectiveness of the Company's internal control over financial reporting * Management's Assessment of the effectiveness of Internal Controls over financial reporting * Attestation by the company's external auditor on Management's assessment of the effectiveness of the company's internal controls and procedures for financial reporting. (Smith, 2001) 2) Correct Practices & Indelible Ink:
* Using pre-numbered checks is good practice to be able to account for them in sequence and track payouts and will become a great part of the monitoring system. * Storing checks in a safe at the end of the business day is respectable practice as well. This becomes a good physical control in safeguarding the checks when they may be most vulnerable to theft or foul play. * Indelible Ink is another great physical control; if the checks issued are printed by machine with indelible ink it will be extremely difficult to tamper and forge checks for false payments.
3) Incorrect Practices:
* By giving one employee duties of treasurer and controller this is in violation of the segregation of duties control, these two roles should be split between separate employees. * Leaving petty cash in a desk drawer does not establish responsibility and is not good practice for this control. The basic use of an “IOU” system is not a strong physical control of this asset as well. The petty cash should be locked in the safe when not in use and being dispersed, also a separate ledger or budget should be...