Separation of Duties in Small Businesses - Cash Receipts, Cash Disbursements, and Payroll

Total Page：16

File Type：pdf, Size：1020Kb

Separation of Duties in Small Businesses - Cash Receipts, Cash Disbursements, and Payroll Two-person Office Business Manager Owner/Manager • Record accounts receivable entries • Sign checks • Mail checks • Sign employee contracts • Write checks • Complete deposit slips • Record general ledger entries • Perform interbank transfers • Reconcile bank statements • Distribute payroll • Record credits/debits in accounting records • Reconcile petty cash • Approve payroll • Approve employee time sheets • Receive cash • Process vendor invoices • Disburse petty cash • Authorize purchase orders • Authorize check requests • Authorize invoices for payment Three-person Office Bookkeeper Office Manager Owner/Manager • Record accounts receivable • Process vendor invoices • Sign checks entries • Receive cash • Sign employee contracts • Reconcile petty cash • Mail checks • Complete deposit slips • Write checks • Approve invoices for • Perform interbank transfers • Record general ledger entries payment • Reconcile bank statements • Distribute payroll • Record credits/debits in • Authorize purchase orders accounting records • Authorize employee timesheets • Approve payroll • Disburse petty cash Four-person Office Bookkeeper Clerk Office Manager Owner/Manager • Record accounts • Distribute payroll • Complete deposit • Sign checks receivable entries • Receive cash slips • Sign employee • Reconcile petty • Disburse petty cash • Process vendor contracts cash • Authorize purchase invoices • Approve employee • Write checks orders • Approve payroll timesheets • Record general • Authorize check • Approve invoices • Perform interbank ledger entries requests for pay transfers • Reconcile bank • Mail checks statements • Record credits/debits in accounting records.

Copy Link

Recommended publications

AHA 2018 Accounting Policy
Albuquerque Housing Authority Accounting Policy 2018 Revised Edition 1840 University Boulevard SE Albuquerque, NM 87106 Phone: (505) 764-3920 Fax: (505) 764-3981 www.abqha.org Albuquerque Housing Authority Accounting Policy Contents Introduction ......................................................................................................................................................................... 3 Housing Authority & Compliance ................................................................................................................................... 3 Department of Housing & Urban Development (HUD) ....................................................................................... 3 HUD Financial Assessment.......................................................................................................................................... 4 Financial Compliance .................................................................................................................................................... 4 Compliance with External Policies .............................................................................................................................. 5 Board Authority .................................................................................................................................................................. 5 Board of Housing Commissioners .............................................................................................................................
[Show full text]
Internal Control Guidance (Pdf)
Kansas State University Internal Control Guidance Purpose The internal control guidelines seek to: • Provide practical tools for those charged with responsibility to process transactions. • Maintain custody of resources. • Communicate established policies and procedures. • Convey the definition of internal control. Key Guidelines Benefits of Effective Internal Control Purpose 1 One of the most misunderstood roles of internal control is the belief that it exists solely to prevent or reduce fraud. In reality, Benefits of Effective Internal Control 1 the purpose of internal control is much more broad. Benefits include: Consequences of a Lack of Internal Control 1-2 • Reliable reporting to support management decisions. • Consistent, efficient methods to process transactions. Concepts of Internal Control 2 • Compliance with university, state and federal regulations. Risk Assessment 2 Effective controls also can reduce instances of noncompliance and negative publicity with grant rules and legislative Information Technology (IT) Controls 3 dictates. These controls ensure continued good relations with students, legislators, the Kansas Board of Regents, grantors, Information and Communication 3 donors and Kansas taxpayers. Effective internal control does more than simply satisfy auditors or central administration. It allows for effective, efficient operations by providing reliable information and compliance with regulations that protect Reporting Fraud and Misconduct 4 future funding. Monitoring 4-5 Control Activities 4 Consequences of a Lack of Internal Control To illustrate the need for controls in a variety of risk areas, we have included the following excerpts from the Auburn Physical Controls 5 University Office of Audit, Compliance and Privacy newsletter. The names of individuals, states and institutions have been Transaction Authorization 5 omitted, and none are from the state of Kansas.
[Show full text]
Internal Controls and the Internal Auditor Presented By: Richard Kudlik, CPA Interrelated Components
Internal Controls and the Internal Auditor Presented By: Richard Kudlik, CPA Interrelated Components Control Environment Risk Assessment Control Activities Information and Communication Monitoring What is an Internal Control? Internal control is broadly defined as a process, …….. effected by an entity's board of directors, management and other personnel,……… designed to provide reasonable assurance…….. regarding the achievement of objectives in the following categories: Protect District assets. Effectiveness and efficiency of operations. Reliability of financial reporting. Compliance with applicable laws and regulations. Limitations of Internal Control 1. Management Override Management may override the structure to commit fraud or misstate the financial statements. 2. Human Errors Human errors may arise from misunderstanding of instructions, mistakes of judgment, and personal carelessness, distractions, or fatigue. 3. Collusion Collusion may circumvent the separation of duties. 4. Changing Conditions Conditions may change, weakening a system that was adequate at a point in time. 5. Combination of duties One employee is performing conflicting job duties (lack of segregation of duties). Control Characteristics When identifying controls within processes – consider the characteristics of those controls Preventative Controls that minimize the possibility of an error or deliberate misstatement Examples: building access cards, segregation of duties, no price change without supervisor’s access code Detective Controls that
[Show full text]
Internal Control Liability Concerns Post Sarbanes-Oxley: Perspectives on Legal Liability and Reasonableness
Journal of Forensic & Investigative Accounting Vol. 2, Issue 2 Internal Control Liability Concerns Post Sarbanes-Oxley: Perspectives on Legal Liability and Reasonableness Richard Mark Roberta Ann Barra Martin E. Taylor* 1. The Role of the Accounting Profession in Internal Control With passage of the Securities Act of 1933 (the 33 Act) and the Securities Exchange Act of 1934 (the 34 Act), Congress directed the SEC “to protect the public from false and misleading information by requiring publicly-owned corporations to disclose financial and other information in a manner which accurately depicts the results of corporate activities. Congress gave the SEC broad authority to establish accounting and reporting standards as part of its mandate to administer and enforce the provisions of the Federal securities laws.”1 The Securities Acts also created a need for accountants to act as independent auditors by requiring that certain information reported to the public by corporations be independently certified.2 Under the 33 and 34 Acts, the SEC had the authority over the establishment of accounting and auditing standards. The SEC decided not to exercise that authority, but instead to rely upon accounting and auditing * Richard Mark and Martin E. Taylor are, respectively, Associate Professor and Professor, both at the University of Texas at Arlington. Roberta Ann Barra is an Assistant Professor at the University of Hawai’i at Hilo. 229 standards established by the private sector as long as these standards had “substantial authoritative support”.3 Over the years, three bodies provided authoritative support for accounting standards: The Committee on Accounting Procedure (CAP), the Accounting Principles Board (APB) and, currently, the Financial Accounting Standards Board (FASB).
[Show full text]
Chapter 7 Questions Multiple Choice 1
Chapter 7 Question Review 1 Chapter 7 Questions Multiple Choice 1. The entry to replenish a petty cash fund includes a credit to a. Petty Cash. b. Cash. c. Freight-In. d. Postage Expense. 2. A $300 petty cash fund has cash of $39 and receipts of $255. The journal entry to replenish the account would include a. debit to Cash for $255. b. credit to Petty Cash for $255. c. debit to Petty Cash for $261. d. credit to Cash for $261. 3. A $150 petty cash fund has cash of $21 and receipts of $126. The journal entry to replenish the account would be a. Cash 126 Petty Cash 126 b. Miscellaneous Expenses 126 Cash Over and Short 3 Cash 129 c. Miscellaneous Expenses 126 Cash Over and Short 3 Petty Cash 129 d. Miscellaneous Expenses 129 Cash Over and Short 3 Cash 126 4. The reconciliation of the cash register tape with the cash in the register is an example of a. other controls. b. independent internal verification. c. establishment of responsibility. d. segregation of duties. 5. Which of the following is not an internal control procedure for cash? a. Payments should be made with cash. b. There should be limited access to cash. c. The amount of cash on hand should be kept to a minimum. d. Cash should be deposited daily. Chapter 7 Question Review 2 6. The following information was taken from Niland Company cash budget for the month of April Beginning cash balance $120,000 Cash receipts 108,000 Cash disbursements 136,000 If the company has a policy of maintaining an end of the month cash balance of $100,000, the amount the company would have to borrow is a.
[Show full text]
Sub-Functions and Components ______
7460.7 REV-2 CHAPTER 4: SUB-FUNCTIONS AND COMPONENTS ___________________________________________________________________________ SECTION 4: SUB-FUNCTIONS AND COMPONENTS 4-1 MAJOR AREAS OF OPERATION. For monitoring purposes, finance and budget activities have been separated into major areas of operation that are called "Sub-functions". These Sub-functions are further divided into "Components" that represent activities within the Sub-function. Each of the Sub-functions and Components are linked and as a result PHA performance in one area will affect the success or failure in others. 4-2 PHA SUB-FUNCTIONS. The success of a PHA depends on how it deals with Sub-functions in its daily operations. The major Sub-functions are as follows: 1.Establishing policies, procedures and/or systems 2.Maintaining budget and financial controls 3.Maintaining accounting books and records in accordance with HUD policy 4.Implementing internal controls 5.Financial reporting 4-3 PHA COMPONENTS. For each of the Sub-functions there are Components that the PHA is responsible for carrying out in an effective manner. The following paragraphs offer a brief description of each of the Components. 1.Budget and Financial Controls ======================================== 24 CFR 85.20 ======================================== a.All PHAs are required to effectively manage Federal funds. Budget and financial management controls must be established to ___________________________________________________________________________ __/__ 4-1 ___________________________________________________________________________ adequately monitor income and expenses. b.Budgeting is a major function of a PHA. A budget is a realistic projection of operating receipts and expenditures for a given period of time to be used as a plan of operation. It is also used to measure an agency's performance.
[Show full text]
Appendix B: a School's Financial Management Systems
A School’s Financial APPENDIX Management Systems a B The accounting procedures and financial management systems used by a school to record and report on the transactions in the Federal Student Aid programs play a major role in the school’s management of those programs. In this appendix, we will discuss the minimum criteria for those procedures and systems, identify areas where problems might arise, and point out poten- tial system weaknesses. FINANCIAL MANAGEMENT SYSTEMS Financial management systems 34 CFR 668, Subpart K A school’s financial management system (including the school’s accounting system) must provide effective control over and accountability for all funds received from the U.S. Department of Education’s (ED’s) Grant Management System (G5). An FSA fiscal management system includes procedures for: ◆ requesting funds from ED; ◆ disbursing funds to eligible students and parents; ◆ accounting for funds and financial activities;1 ◆ keeping accurate and auditable records including providing the clear audit trail required by cash management regulations;1 ◆ meeting the documentation requirements of the individual program regulations; ◆ managing cash; ◆ ensuring proper filing of timely applications; and ◆ enabling timely internal and external financial reporting. At a minimum, a school’s financial management system, including its accounting system, must provide: ◆ accurate, current, and complete disclosure of the financial condition of each federal aid program or project sponsored by ED; ◆ records that adequately identify the source
[Show full text]
Section 5- Internal Control Activities & Best Practices
Rhode Island Office of Internal Audit Internal Control Guide & Resources Section 5- Internal Control Activities & Best Practices Managers must establish internal control activities that support the five internal control components discussed in Section 2 of the Internal Control Guide. There are two main types of control activities. Controls can be either preventive, for example, requiring supervisory sign-off before an item is purchased, or detective, for example reconciling bank statements to ensure that all payments are appropriate. Examples of key internal control activities that agencies should establish and incorporate in an internal control structure are described in the following sections. Authority The various stages of a transaction or activity should be carried out and approved by employees acting within their range of knowledge and proper span of control. These stages include the processes of recording, approving, and reconciling. Best Practices: • Policies and procedures should clearly identify which individuals have authority to initiate, submit, reconcile, view or approve different types of transactions. • Employees should be properly trained and informed of departmental procedures related to internal controls. Individuals approving transactions should have firsthand knowledge of the transactions, or they should review supporting documentation to verify the validity and appropriateness of transactions. • The workflow process should stress timely authorizations as well as timely processing of transactions following approval. Workflow is an important aspect of good internal controls. Time lags between approval and processing provide opportunities for altered documents and potential fraud. 1 Rhode Island Office of Internal Audit Document Internal Controls and Maintaining Other Types of Documentation Documenting policies and procedures is especially important because change happens constantly.
[Show full text]
Separation of Duties in Information Technology
Separation of Duties in Information Technology John Gregg, Michael Nam, Stephen Northcutt and Mason Pokladnik Separation of duties is a classic security method to manage conflict of interest, the appearance of conflict of interest, and fraud. It restricts the amount of power held by any one individual. It puts a barrier in place to prevent fraud that may be perpetrated by one individual. Fraud will still occur if there is collusion. To be certain that you have identified all separation of duties issues, you will first need to create an information flow diagram for every function within each area of the organization. However common sense can help identify a large number of situations where separation of duties is appropriate. For instance, positions that handle money, valuable items, and new and attractive items (think iPad after it first came out), require a number of controls. Although there are a number of similar controls among organizations, specific controls are relatively different between industries. There is no complete matrix that may be applied to all organizations. separation of duties within each company is unique. Since separation of duties equates to additional cost because it often increases head count, a risk assessment should first be performed to determine whether it is necessary, or whether compensating controls are adequate. As you are aware, management may decide to accept, reject, or divert the risk instead of controlling the risk through separation of duties. It is a balance between the cost and the amount of risk being considered and addressed. Once this is decided, management may determine where separation of duties will be applied.
[Show full text]
CPO Internal Controls Webinar April 11, 2019 11:00 AM CT
CPO Internal Controls Webinar April 11, 2019 11:00 AM CT Christie Hillsman: Good morning, everyone. Welcome to NFA's webinar, CPO Internal Controls. My name is Christie Hillsman, and I'm a Communications Manager at NFA. And with me today are Patty Cushing, Director of Compliance, and Ryan Ahlfeld, Manager II, Examinations, Compliance. As you know, NFA recently adopted a new Interpretive Notice titled CPO Internal Controls. The Interpretive Notice requires all CPO Members to implement an internal controls framework designed to protect customer funds, provide reasonable assurance that the books and records of a CPO's commodity pools are accurate and reliable, and that the CPO is in compliance with all CFTC and NFA requirements. The Interpretive Notice became effective on April 1, 2019. During this webinar we will discuss the requirements established in the Interpretive Notice. Following our prepared remarks, as well as throughout the webinar as appropriate, we've allocated ample time to answer any Member questions that might be submitted. To ask a question, locate the box labeled "Ask a Question" on the left side of your webinar screen. Please type the question you would like to ask into the box and click the "Send" button. We are able to see your questions as they are submitted. Please feel free to submit your questions now or at any time during today's webinar. For questions that are firm specific, note that we will reach out to you individually following the webinar. Additionally, a recording of this webinar along with a written transcript will be on NFA's website in the coming weeks, so no need to take detailed notes throughout this presentation.
[Show full text]
Separation of Duties for System Security Administration and Auditing
Chief Information Officer Office of Information Services Centers for Medicare & Medicaid Services CMS Operational Policy for Separation of Duties for System Security Administration and Auditing March 2006 Document Number: CMS-CIO-POL-INF07-01 TABLE OF CONTENTS 1. PURPOSE................................................................................................................................1 2. BACKGROUND.....................................................................................................................1 3. SCOPE.....................................................................................................................................1 4. OPERATIONAL POLICY....................................................................................................2 5. ROLES AND RESPONSIBILITIES.....................................................................................2 5.A. IT INFRASTRUCTURE SYSTEM ADMINISTRATORS ........................................................................ 2 5.B. IT INFRASTRUCTURE SECURITY ADMINISTRATORS ..................................................................... 3 5.C. CMS SECURITY AUDITORS........................................................................................................... 3 6. APPLICABLE LAWS/GUIDANCE.....................................................................................3 7. EFFECTIVE DATES .............................................................................................................4 8. INFORMATION AND ASSISTANCE.................................................................................4
[Show full text]
Accounts Payable Process: Number: BP- 03
State of Vermont Department of Finance and Management Financial Issue Date: July 2006 Accounts Payable Process: Number: BP- 03 Revision Topic: Internal Control - Best Practices N/A Date: Applicable All State Agencies, Departments, Page: 1 of 3 To: and Offices Objective Departments shall devise techniques and procedures for the proper approval and payment of expenditures of public monies for goods and services incurred to support its programs. Proper internal controls effectively and efficiently minimize the risks associated with accounts payable and purchasing activities, reduce the risks of fraud and costly errors, and protect the assets of the state. Risks o Unauthorized or fraudulent purchases/payments. (high degree of inherent risk) o Duplicate payments to vendors. o Payments to vendors prior to vendor terms which negatively impact the state’s cash flows. o Late payments to vendors resulting in late fees and loss of goodwill. o Inefficient processing of payments. Definition The term “accounts payable” refers to processing payments for invoices and contracts for goods and services incurred by the State of Vermont. (This document does not address “Petty Cash” disbursements which are discussed separately under Best Practices # 2 – Petty Cash.) Best Practices Include Written procedures should be established regarding the initiation, review and approval of all accounts payable expenditures. [Documentation] Invoice handling procedures should include written documentation of the processes for routing and forwarding of invoices for payment and the methods used to manage exceptions. [Documentation] Financial Issue Date: July 2006 Accounts Payable Process: Number: BP- 03 Revision Topic: Internal Control - Best Practices N/A Date: Applicable All State Agencies, Departments, Page: 2 of 3 To: And Offices Payables, disbursements and expenditures are properly accumulated, classified and summarized in the accounting records.
[Show full text]