Internal Controls for Inflows
Rosa Alvarez, Quenana Kent, Renee Witucki, Steven Mitchell, K’Dawn Saucedo
October 15, 2012
Internal Controls for Inflows
Team C Consulting Firm Inc. was hired to review ABC Manufacturing Company’s policies and procedures. Team C Consulting Firm Inc. reviewed several areas of the business such as, cash, sales, accounts receivable, inventory, and production policies and procedures. Based on Team C Consulting Firm’s review and findings, ABC Manufacturing Company has weaknesses in each of the mentioned areas. Therefore, it is necessary ABC Manufacturing Company is provided with a comprehensive proposal of internal controls for each ...view middle of the document...
Separation of duties and proper authorization are great controls to reduce to the risk of cash misappropriation, but proper documentation and account balance checks are vital in ensuring that the amount of cash that a company shows in its book is actually there. Numbered checks are important in keeping track with how many checks the company has written, and frequent bank reconciliations will allow the company to match the cash amount recorded in the books with the cash amount that is on deposit at the bank. If there is a discrepancy between these two numbers then management knows that there are problems somewhere, and they can effectively investigate the situation. The final control measures that should be implemented are physical controls. These types of controls are physical security measures that protect cash such as locked boxes to store the company checks and locked drawers to keep petty cash and any other cash that is on hand prior to bank deposit. Physical controls are probably the easiest control measure to implement and they are usually the most effective at protecting the cash that a company has on hand.
A control over sales is an important tool not only for the company, but also for the customers. The controls that must be applied over sales are software controls, this are made to protect against unauthorized orders and the customers privacy, for credit approvals to certify that are being placed for legal customers and customers who have the means to pay their debt, numerical sequencing for all documentation involving to a sale beside with proper signatures at all points of the transaction, and controls for price and invoice changes.
* No sales order should be entered without a customer order.
* A credit-check code or manual signature should be recorded for authorization.
* Access to inventory and the shipping area should be restricted to authorized persons.
* Access to billing terminals and blank invoice forms should be restricted to authorize personnel.
* Accountants should be instructed to record sales and accounts receivable when all of the supporting documentation of shipment is in order.
* Care should be taken to record sales and receivables as of the date the goods and services were shipped and the cash receipts on the date the payments were received.
* Customer invoices should be compared with bills of lading and customer orders to determine that the customer is sent the goods ordered at the proper location for the proper prices and that the quantity being billed is the same as the quantity shipped.
* Pending order files should be reviewed frequently to avoid failure to bill and record shipments.
Auditors must perform a revision once in a while to verify their understanding of the procedures. The revenue and collection cycle revisions includes a sale from the initial customer order through credit approval, billing, and delivery of goods, to the entry in the sales journal and...