Assignment 1: Colorado Springs Company’s Internal Control Colorado Springs Company (CSC) is a wholesaler with fiscal year ended December 31 of previous year. Since it is publicly-traded, it undergoes external audit. The most recent audit was completed in February of this year. As part of the audit of the financial statements, the auditors tested the effectiveness of management’s assessment of internal control over financial reporting. The auditor found out that existing internal controls were inadequate. Specifically, CSC’s accounting system for sales, cash receipts, accounts receivables, and accounts payable had material weakness. The audit revealed that there were: Poor accounting system of recording keeping Late deposits of cash receipts Excessive aged and high accounts receivable balances Disregard for early payments for discounts on invoices Late payments of accounts payable (sometimes due to lack of cash) Lax appropriate segregation of duties Relaxed rules on accounting principles’ application Unqualified supervisor and management Inadequate control on supervisor and management overrides Lax oversight by external board of directors For each finding above, indicate internal control principle that CSC violated. For each finding above, provide an appropriate recommendation for CSC to correct the weakness. Your response should include two to three pages of written text in addition to any calculations and solutions you offer to support your thinking. Document formatting and any citations should conform to CSU-Global Guide to Writing and APA Requirements.
Colorado Springs Sodality’s inside pilot
Name:
Institution:
Poor accounting plan of archivesing guardianship
Poor accounting and archives guardianship by the curbm is a apparent manifestation of a oft inside pilot plan and reversals associated with documentation. Reliability, as courteous as success, is an influential exhibition of accounting that should be perceive-keepd except the curbm seems to bear failed to vevince these policies thus induced to errors. CSC failed to perceive-keep accounting proceedings associated with the fullocation of duties. Noncommunication of fair archives guardianship could medium that there were scant accounting employees and duties were not attributable attributable attributable attributable attributable attributable shared justly. There was no favoring indivisible under obligation curb body guardianship. The skill failed to determine fair documentation of financial proposition (Doyle & McVay, 2007). To qualify fair body guardianship and accounting, the sodality ought to acquisition an unstudied the rejection plan of accounting such as the QuickBooks
Past confidences of specie income
Noncommunication of apparent disengagement of specie artisanling duties, refuge of proceeds as courteous as a apparent prudence to determine existing confidence could bear led to past specie reimbursement. One idiosyncratic ought to be in pilot aggravate full the specie (Doyle & McVay, 2007). The idiosyncratic in admonish should bear assistants under obligation curb receiving specie, disbursing specie amounts, archivesing specie transactions, preparing bank slips, making bank confidences and reconciling specie on a daily plea. Diving these duties discurrent uncertain assistants could minimize chances of past confidence of specie income. Additionally, the accounts receivable accountant should determine that confidences are made amid the favoring age condition.
Unimputable old and excellent accounts receivable balances
The old accounts fullocation announce is the antagonistic of the accounts receivable announce. A receivable old announce enables the sodality to prove the balances which are stableable to the curbm by the clienteles. On the other artisan, an accounts stableable announce enables a unshaken to prove what it owes the suppliers. The intercourse of unimputable and superior accounts receivable could evince that there is reversal of accountability as courteous as contrariance of duties. The curbm ought to determine that accounts receivable are manold by a superior accountant and his or her assistants (Doyle & McVay, 2007).
Omission curb existing reimbursements curb remittances on invoices
Even though there no rules of accounting that deficiency companies to follow concertedly of existing incentives such as remittance except with the shortness of savings remittance reimbursement could be reputed as omission curb savings. Policies that pilot edibles of remittances and savings should be created (Spira & Page, 2003)
Past reimbursements of accounts stableable (casually imputable to noncommunication of specie)
Illmatched pilot measures to protection specie and other proceeds to be used to stable bills. Besides, there is noncommunication of apparent rules and policies the deadline curb stableing bills. The curbm should follow up with favoring dates when full reimbursements deficiency to bear been made (Jensen, 1993). It should besides transcribe accounting policies which expound when full reimbursements are imputable probable there is no specie. In predicament there is no specie bills deficiency to be paid as promptly as coin is profitable.
Flabby alienate contrariance of duties
It seems the curbm noncommunications abundance staff. When aggravate drudgery bear to be obliging there in deficiency curb the curbm to deduce employing aggravate staff. Once aggravate effecters are rentd; the skill ought to deal-out duties according to an employee’s area of specialization (Jensen, 1993). This obtain improve faster substance of effect and growth aptitude and usefulness of operations.
Relaxed rules on accounting principles’ application
There are no measures prostrate in establish to determine that accounting policies are perceive-keepd. The curbm could bear failed to comment alienate accounting principles inevitable curb fair accounting and body guardianship (Jensen, 1993). Therefore the curbm should investigate the inevitable accounting policies, transcribe them and command employees to unite to these principles to prefer accountability.
Uncompetent superintendent and skill
The curbm does not attributable attributable attributable attributable attributable attributable unstudieder on operation luxuriance opportunities to employees. Furthermore, there are no fair warrant and approbation proceedings inevitable to qualify segregation of competent superintendents and managers (Jensen, 1993).There is deficiency curb the curbm to prove the credentials, abilities and test of an employee antecedently fullowing them to guide others. The sodality should rent indivisibles who are already skilled and unstudieder them aggravate luxuriance services.
Illmatched pilot on superintendent and skill aggravaterides
This seat shows that an curbm has failed to perceive-keep inside pilot proceeding cognate to approbation and supervision. The sodality should follow up with proceedings and policies relating aggravaterides and perceive-keep these policies.
Flabby aggravatesight by superficial consultation of directors
Carelessness or flabby by the superficial consultation component could be a reversal of warrant and approbation. The consultation could besides bear illmatched conversance in-reference-to supervision. The best force that the skill can conduct is luxuriance the component of the consultations.
References
Doyle, J., Ge, W., & McVay, S. (2007). Determinants of oftnesses in inside pilot aggravate financial announceing. Journal of accounting and Economics, 44(1), 193-223.
Jensen, M. C. (1993). The novel industrial form, debouchure, and the want of inside pilot plans. the Journal of Finance, 48(3), 831-880.
Spira, L. F., & Page, M. (2003). Risk skill: The reinvention of inside pilot and the changing role of inside audit. Accounting, Auditing & Accountability Journal, 16(4), 640-661.