Finding 978827 (2023-001)

2023-001 Segregation of Duties Criteria: A basic internal control over financial reporting is the segregation of duties of transaction processing, record keeping, reconciliation, and custody of assets. Condition: This is an inherent limitation for entities that are small in size and thus, have limited staff to perform designated functions. Context/Cause: During our audit, we noted that duties were not segregated in a number of areas where small adjustments to the policies of the Entity could help to further facilitate this important control. These areas include cash disbursements, bank reconciliation, customer billing, cash receipts and collections, and approval of journal entries. Effects: Lack of segregation of duties and a corresponding lack of monitoring and oversight increases exposure to misappropriation of assets and errors in financial reporting. Recommendation; We recommend that management continue to evaluate the procedures and policies used in the accounting area and continue to segregate duties where possible. Additional oversight, monitoring, and approval will be necessary in areas where duties cannot be segregated at an optimal level due to limitations in staff size. Auditee’s Response; Management has issued written policies and required training of all employees that handle financial transactions and has continually evaluated processes to find ways to segregate duties where possible. Management and the board of directors continue to oversee operations closely requiring approvals for all transactions.