Finding Text
SECTION II – FINDINGS - FINANCIAL STATEMENTS AUDIT
2023-001 Lack of Segregation of Duties
Significant Deficiency
Criteria – A good system of internal control contemplates an adequate segregation of duties so that no one individual handles a transaction from its inception to completion.
Condition – Change Inc. has a lack of segregation of duties in the cash receipts process. One individual deposits the cash, enters the receipts in the accounting system, and prepares the bank reconciliation. For certain types of revenue, this also involves recorded the revenue in the accounting system.
Cause – Change Inc. has a missing step in the internal controls as designed. Change Inc. has another individual open the mail and prepare a listing of cash receipts received each day. However, no one ever compares this listing to the receipts recorded in the accounting system.
Effect – Change Inc. is exposed to an increased risk that misstatements (whether caused by error or fraud) may occur and not be prevented or detected by management on a timely basis.
Recommendation – We recommend management review and update their cash receipts process to add additional segregation of duties to the process. For example, by having another member of the accounting team (not the individual making the deposits and recording the information) reconcile the deposit listing and the accounting system on a regular basis.
Auditee's comments and response – Management is in agreement with this finding. Change Inc. will be performing a review of their accounting and financial policies and procedures that will include improvements as needed.
Responsible party for corrective action: Jill Johnson, Associate Director
Repeat Finding: No