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Internal Control Weaknesses: Audited Internal Control Weakness Disclosures

The Teen Support Centre has various weaknesses in its internal control systems. Any organization’s cash receipt procedures are implicit in several flaws that may negatively impact its accounts portfolio (Adhikari et al., 2020). These weaknesses may compromise the level of precision and assurance in matters regarding financial controls. One of the weaknesses is seen in how Kim handles the donations. As noted, Kim sorts all contributions from mail and prepares a comprehensive list. She includes the actual names of donors and records those who are anonymous and the donated amount, and the pledge number. She then forwards the record of charitable contributions to the accountant. Kim has worked for this organization for over a decade. Since she works alone, she has the opportunity to abscond with anonymous cash donations that are infrequently sent into the charity. If she fails to include the unidentified cash donations in the final contributions lists, no one will likely learn about the missing records.

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The implication is that there is a missing segregation of duties. Therefore, this is a major weakness in the organization’s internal controls. The control solution for this weakness is to ensure the mail service is not left in one employee’s hands for such a long duration. In this regard, the organization should always ensure that another worker is present to observe the opening of the mail donations. The management does not necessarily need to hire an additional worker; rather, it can choose one from the existing team.

The second weakness is that the accountant has physical possession of the donated funds. He also can create accounting records through the cash receipts journal. This elicits a possibility for record manipulation, which may lead to loss of donation funds. On the underscore, using a bank reconciliation generated by the accountant and bank deposits opens a possibility for non-detectable theft. Any cash or cheque contributions should be given to the office manager for deposit to control this issue. In addition, the donation list should be routed to the accountant for him to record in the cash receipts journal.

Reference

Adhikari, S., Guragai, B., & Seetharaman, A. (2020). Market response to audited internal control weakness disclosures. Journal of Forensic Accounting Research, 5(1), 2-20.

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StudyCorgi. 2022. "Internal Control Weaknesses: Audited Internal Control Weakness Disclosures." October 2, 2022. https://studycorgi.com/internal-control-weaknesses-audited-internal-control-weakness-disclosures/.

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StudyCorgi. (2022) 'Internal Control Weaknesses: Audited Internal Control Weakness Disclosures'. 2 October.

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