Internal controls in inventory, accounts payable, accounts receivable and payroll are an important part of a company system. The four systems require efficiency and accuracy from the employees before accounting system can ensure expedient access to cash availability.
Internal controls provide foundation for successful and safe organization. Information listed in this brief will provide management some insight into the internal controls and some risk organization should be aware off.
Payroll
The payroll chart not clearly defines the process and procedures. Approval of the employee timecards in the system is missing. Because the system is automatically capturing time, approval of the employee timecards in the system should be out loaded based on the biometric system.
Personal in charge for the payroll input data should only have to enter all sick leave, vacation or overtime once. The system will automatically load this afterward.
Approval of the payroll needs to be included in to the system to avoid fraud and to establish preventive controls.
Inventory
Inventory receipts have to match electronically version of the PO. In addition to this receipt will be send to AP to match the invoice. However, inventory will be updated by POS sales.
Addition of the bar code inventory can be scanned in and out from system and automatically updated with the stocking, checks and balance and monthly inventory information. Inventory system will be in the accounting system available for the review.
Internal Control and Risk Evaluation
Accounts Receivable
Accounts receivable can be improved by adding future growth in flow charts for invoicing. Nevertheless to say, expansion of the catering, and invoicing for business to business sales are required. In addition to this information, new collection method is added.
Accounts Payable
To match receipt to the invoice we recommend Po system. Risk of entering an invoice to printing checks without manager approval or matching can be skipped by the validation of the checks on documents, batching documents on checking batch total, and authorization process.
In conclusion we can say that is important to recognize risk and internal controls. Organization as Kudler Food’s need to prevent fraud, data integrity, policies and procedures set by management for checks and balances.
Implementing strategies to create an effective internal control environment is needed to prevent and detect controls of fraud (Murphy, 2015). Control is needed to combat fraud, enforcing employees and volunteers to do the right thing. Management must have control of the organizations operations to tackle risks when they arise (Arshad et al, 2015). According to Arshad et al (2015):
There are some limitations of internal controls. One is a person knowing the system. This person knows when everything is done and how it is done he or she can find a loophole and use it to his or her advantage. Another limitation is...
If receipts and issues of items under inventory are not tightly controlled, the inventory may be in error. Therefore, IM must make sure that stock control section and storage section personnel coordinate to accurately process PD 01–03 and NMCS receipts and requests during the inventory.
Having a web-based system in tact will provide stability in payroll processes and provide the reporting information needed to move forward in the decision making practices. This analysis will concentrate on aspects of the payroll activities and the current risks associated with these
We will also be tracking down direct verification of inventory that is held by public warehouses or outside keepers. Auditors will think through Costco’s actions for assessing warehouse’s performance, internal auditor’s report on warehouse’s internal control, and reconcile Costco’s record of inventory to warehouse’s statement. We will also account for any crack in receiving and shipping records. Auditors will test for appropriate authorization for inventory purchase, obtain purchase journals linked to vendor’s accounts, receiving reports and purchase orders. We will also review right of entry to accounting system linked to inventory to decide relevance of system access, review relevance of inventory write-offs and track the moving of inventory from one warehouse to receiving of the other warehouse.
There are times in many small businesses where it makes more sense to outsource a task than have to do it yourself. When it comes to payroll, the work could end up taking hours and hours of the owner's time. If they give it to an employee, that employee will be taken away
There are several important people involved with this project and will help with the necessary changes needed for the Payable Audit System (PAS). Each person has a very detailed job description and the skills that would be used to make the changes to the system. First, Ted Anderson the director of disbursement began to notice how their current system was very labor-intensive. He knew of other ways to increase the productivity to the system and he would help in the plan to transform these changes. First, he changed the mind-set of how the system would work, and he organized a difficult training course with a 9 month duration designed for the employees. With his role on this project the company will make several fundamental changes, to pay the invoices in their tolerance. Keeping all history transactions, they would adopt a quality-control approach. Also eliminating all their paper files they would develop a Document Control System (DCS), where they would scan all of their documents into their computer system.
The company requires customizable invoicing. Invoices need to indicate the name of the customer, remittance address, date, an invoice number, purchase description, the amount of the purchase, and whether it includes sales tax.
Next you want to perform a full physical count of your existing inventory. An important component in any system is to ensure the data entered in the beginning is accurate. For example, if you have 10 bottles of ibuprofen in the stock room then the inventory count entered should equal the same amount. If your inventory counts are wrong, the inventory system will not function efficiently to provide the best
Inventory is one of the resources that are managed by business organizations and it was first recorded in 1601. The need for inventory control cannot be overemphasized as it is a means for improving the performance of manufacturing industries. Inventory can be defined as a record of a business current assets including property owned, merchandise on hand and the value of work in progress and work complete but not sold and it is classified as a current asset because it can be turned into liquid cash within a short period of time. Inventory has created a great impact on the profitability of the manufacturing firm which resulted to the deep research of this topic.
Evaluate the internal control to confirm that the payroll payments are for existing employees. This test should include examining every employee’s time card as well as their personnel files. If there is an employee time card for an employee who does not have a personnel file, or if their file indicates that they are no longer an employee of the company, then that indicates that there is an issue and more investigating should be conducted.
In the accounting department, the information is an important element that running the operation of the department. The accounting department is relying on the information as well as other department that rely on it in the other way around. It is important that other department give the invoice and other accounting relevant document to the accounting department for management and kept. It is also vital that the accounting department provide the right and accurate information to the organization and other department. The reliability and prediction of the information determine the future of the organization and the trustee of public to the organization.
Since the company is busy in the downsizing, it seems that effective internal controls are not in place and therefore it is recommended that there should be written policy regarding the implementation of internal controls by the employees. This trend should be set by the management from top to bottom so that every employee must be aware of its role.
An acceptable technology, a specified and robust inventory management strategy, an adequate inventory record keeping and auditing, and specified performance measures are the most important inventory related working conditions. Management, first and foremost, must give priorities and expectations that are necessary for accurate inventory records.
For instance, AEON’s payroll cycle has five different departments and each department involves in every process and duty to ensure that the process runs well. An effective internal control system can incorporate the segregation of duties of accounting functions and other areas that deal with valuable or sensitive data. Appropriate segregation of duties can improve the effectiveness and efficiency of record keeping, calculation, and authorization and review process of each business function. Besides that, assigning a manager to regularly review company bank records related to payroll can further ensure proper and correct payroll records. In addition, maintaining a separate bank account solely for payroll can help to make auditing easier and reduce the amount of company assets at