Design a Proposal for Appropriate Controls to Cover Cash, Sales, Accounts Receivable, Inventory, and Production.
Controls for Outflows
ACC/544
November 12, 2012
Controls for Outflows
Small, midsized, and large businesses need effective controls to ensure that the business has the lowest risk rate possible. The lower the risk, the less likely that fraud would occur. In this analysis, Learning Team B will provide a proposal for appropriate controls to cover cash, sales, accounts receivable, inventory, and production. The team will discuss some prevention techniques to reduce these risks and make recommendations in areas that will help controls within the organization.
Cash Controls
Internal controls for cash is essential to ensure that transactions are properly recorded, fraud risk is managed, and management have given the proper authorization for the cash transactions. Internal control objectives also include employees understanding their responsibility and accountability within the company. Each of these controls will allow the company to mitigate any losses. The following are recommended internal cash controls:
Segregation of duties - No one person should control the transaction from start to finish. Example - if a check is received for payment, one person will enter the payment, a separate person will record the payment and a final person will reconcile the canceled checks with monthly bank statements.
Authorization – A fixed price list is an authorization for the proper price for items to be sold. Any difference in the pricing must be authorized by management. Example – A salesperson must get authorization from management to give a customer a 15% discount for a slightly damaged inventory item.
Recording – Sales receipts, invoices, and other sales documents must be pre-numbered and consecutive. Any deviations from this must be approved by management. Example – If the salesperson needs to void an order and re-issue with a new receipt, the reason must be written and documented for management approval.
Physical Control – Sales registers and
ACC/544
November 12, 2012
Controls for Outflows
Small, midsized, and large businesses need effective controls to ensure that the business has the lowest risk rate possible. The lower the risk, the less likely that fraud would occur. In this analysis, Learning Team B will provide a proposal for appropriate controls to cover cash, sales, accounts receivable, inventory, and production. The team will discuss some prevention techniques to reduce these risks and make recommendations in areas that will help controls within the organization.
Cash Controls
Internal controls for cash is essential to ensure that transactions are properly recorded, fraud risk is managed, and management have given the proper authorization for the cash transactions. Internal control objectives also include employees understanding their responsibility and accountability within the company. Each of these controls will allow the company to mitigate any losses. The following are recommended internal cash controls:
Segregation of duties - No one person should control the transaction from start to finish. Example - if a check is received for payment, one person will enter the payment, a separate person will record the payment and a final person will reconcile the canceled checks with monthly bank statements.
Authorization – A fixed price list is an authorization for the proper price for items to be sold. Any difference in the pricing must be authorized by management. Example – A salesperson must get authorization from management to give a customer a 15% discount for a slightly damaged inventory item.
Recording – Sales receipts, invoices, and other sales documents must be pre-numbered and consecutive. Any deviations from this must be approved by management. Example – If the salesperson needs to void an order and re-issue with a new receipt, the reason must be written and documented for management approval.
Physical Control – Sales registers and
References: Louwers, T. J., Ramsay, R., Sinason, D., & Strawser, J. (2007). Auditing and assurance services: A look beneath the surface (2nd ed.). Retrieved from The University of Phoenix eBook Collection database. Zeepedia. (2012). Retrieved from: http://www.zeepedia.com/read.php?control_procedures_over_sales_and_debtors_fundamentals_of_auditing&b=25&c=24