Finding Text
Criteria: The Organization should segregate duties, at a minimum to separate the asset and the recordkeeping function, to minimize the opportunity for misstatements caused by error or fraud to occur and go undetected within a timely period by employees in the normal course of performing their assigned functions. Condition: Segregation of duties is an internal control intended to prevent or decrease the occurrence of errors or intentional fraud. Segregation of duties ensures that no single employee has control over all phases of a transaction. We understand that this condition is not unusual in organizations of your size, and it may be cost prohibitive to hire additional employees to improve your internal controls; but we are required to communicate this deficiency to you. Under these conditions, the most effective controls rest in management's knowledge and monitoring of the Organization's finances. Cause: Due to the size of your organization and the limited number of employees in the accounting area, your internal controls over cash receipts and disbursements are inadequate because of a lack of segregation of duties. Effect or Potential Effect: The lack of segregation of accounting duties could create an opportunity for misstatements caused by error or fraud to occur and go undetected within a timely period by employees in the normal course of performing their assigned functions. Recommendation: Due to the size of the Organization, it is not practical to hire additional individuals in order to adequately segregate accounting duties; therefore, we recommend that the outsourced Bookkeeper and Board of Director's close supervision, review of accounting information and knowledge of matters relating to the Organization's financial operations provide an effective means of preventing and detecting errors and irregularities.