Finding Text
Condition and Context:
Management did not have adequate controls over the bank reconciliation process to ensure that
the reconciliation was completed on a timely and accurate basis.
Criteria:
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal
Control – Integrated Framework defines control activities as “policies and procedures that help
ensure management’s directives are carried out.”
Effect or Potential Effect:
Management included multiple bank accounts in a single general ledger account. Additionally,
management included due from/due to accounts within cash account transactions which led to
commingled activity within the general ledger account and thus reconciliation to the bank
statements a more challenging process. As a result, management recorded journal entries during
the audit to correct the general ledger for previous month ends. This could have allowed
unidentified errors to go unnoticed during the fiscal year which potentially could have been
material to the financial statements. The potential effect is that accurate information may not be
available on a timely basis to make management decisions.
Questioned Costs:
None.
Recommendation:
During the audit, we were informed by management that the yearend bank statements were not
accurately reconciled to the general ledger on a timely basis. Most of the problems encountered
within the area of cash can be avoided if a proper system of checks and balances is incorporated
into the County’s procedures. We recommend that all of the bank accounts be reconciled
monthly to specific general ledger accounts and that all suspicious reconciling items be promptly
investigated and adjusted with adequate explanations.
Views of Responsible Officials:
Management agrees with the finding. Refer to the schedule of corrective action plans section in this
report.