UOPX ACC 544 - Controls For Outflows

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Controls For Outflows   Just as a company needs internal controls for inflows of assets, controls for the outflows mustbe in place to detect and deter errors and fraud.  Internal controls are also needed so an organization can conduct business in an efficient manner, protect assets and resources, ensure accuracy of accounting data, produce reliable financial and management data, and ensure observance of the organizations policies and procedures ("Business Dictionary", n.d.).  This proposal will offer appropriate controls for the processes of purchasing, accounts payable, cash disbursements, finance, investments, and payroll.PurchasingA company is in business to make money, but to make money it has to spend a large part of its budget on goods and services.  These acquisitions can be numerous and involve big dollar amounts so internal control procedures are important to this process.  A company should have written policies regarding purchasing activities that are reviewed regularly by management and departmental employees.  Consistent review of policies and procedures allow regular understanding of what is expected as well as the realization of needed changes and updates.  Many times mistakes are made because employees do not understand protocol or the purchasing functions are falling behind because of rapid company growth.  The following suggestions will permit better internal control of purchasing functions:  • Segregation of duties – different employees should be assigned to approving purchases, ordering items, receiving ordered items, authorizing invoices, posting in financial software and maintaining inventory counts.  • Maintain ethical buying practices – Determine what purchase amount will require written proposals, review periodically who is authorized within the company to make contracts withexternal suppliers, verify invoice payment terms and authorize to pay appropriately to take advantage of discounts offered, and reconcile actual purchases against contracts, agreements and purchase orders.  • Reconcile purchase orders, packing slips, and invoices – verify that items ordered were actually received or that services were performed, verify the supplier or service provider invoiced for the correct amount, and reconcile the appropriate expenses to the correct general ledger account. If purchases result in an accumulation of inventory, the inventory should be kept in a secure location.  Only authorized individuals should be allowed in this location and periodic inventory counts should be done by employees other than the individuals with authorization to receive inventory and that are allowed in the restricted location.Cash Disbursements   The objectives of internal control for cash disbursements are to have proper authorization for cash transactions and that these transactions are recorded properly.  Segregation of duties happens when a transaction is handled by separate employees, so that no one transaction is completed from start to finish by one person. This is one of the most important aspects of internal controls with cash disbursements.  Another aspect of internal controls is to ensure that the check signing within the organization is completed by only authorized management. The number of authorized signers should be used depending on the amount of the cash disbursement.  For example, if the check is for $1,500 for reimbursement of travel expenses, management should authorize two signatures for this request.  The following is an internal controls checklist that will help in mitigating loss within the organization.  • Are all cash disbursements made by pre-numbered checks?  • Is there a written policy that does not allow checks to be written for cash?  • Are voided checks filed for auditing purposes?  • Are expenditures approved by the proper authorized management?  • Do checks above the policy amount require two signatures?  • Are purchase orders pre-numbered for accurate accounting?  • Are bank statements reconciled by a person independent from the person signing the checks?  • Is there a report of unpaid invoices which is checked regularly?Each of these questions will ensure that the cash disbursements are properly controlled within theorganization.  As the company grows or changes their systems, the internal controls will need adjusting to keep pace with the changes.Accounts Payable Controls:   Controls over accounts payable procedures are important for several reasons. They help make sure information regarding payable transactions is recorded correctly. More important for the company, controls help guarantee authorization of purchase transactions. These controls also help to ensure the company makes accurate and timely payment to their vendors (Blink, 2012). Accounts payable provides a source of cash for the company so it is important controls are working effectively to prevent the cash from resulting in unintended locations.  Following are some suggestions of appropriate accounts payable controls:    • Segregation of duties among approving vendors, authorizing payment for invoices to approved vendors, and review/reconciliation of account payable documents.    • Incorporate a list of pre-approved vendors that are authorized for purchases and payment.    • All payable requests should be for authorized vendors only. Requests for unapproved vendors should not be processed.    • All payable requests should be reviewed and approved for payment.    • Continuously ensure that payables are paid in a timely behavior.    • All payables and requests should be reconciled periodically to ensure records are accurate and up-to-date.    • Any receipt of inventory/goods should be verified and reconciled with purchase orders or invoices to ensure the correct orders have been received.    • Ensure inventory/goods are stored in a safe and secure location with limited but appropriate access.    • All payable cancellations, returns, or credits should be documented accurately with detailed information (Blink, 2012).   Each control plays a part in the accounts payable procedures that help mitigate risks. These threats include unapproved payments made to fictitious vendors, unauthorized


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