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He previously worked at Baker’s Press Limited for over 3 years as an Internal Auditor. Phillip, who has only been working tit Bran’s Publishing for the past year, suggested to his supervisor that the company seriously consider Implementing an audit committee in order to enhance independence, overall competency, efficiency of operations and transparency. He further stated that his former employers have an active committee in place for over two years. Phillip recently completed his probation and was sent two assignments.
Assignment #1 Phillips first assignment was to commence planning process for a review of the revenue cycle – accounts receivables department at Bookstore Company Limited. Phillip as a part of this process carried out a preliminary survey. The preliminary survey Indicated that severe staff reductions at the audit location had resulted In extensive amount of overtime among accounting staff. Department members are visibly stressed and very vocal about the effects of cut backs. Accounting payrolls are nearly equal to prior years, and many key controls such as segregation of duties, are no longer In place.
The accounting supervisor now performs all operations within the cash receipts and posting process, and has no time to review transactions enervated by the remaining members of the department. Journal entries for the last six months since the staff reductions show increasing numbers of prior month adjustments and corrections, including revenues, cost of sales, and accrual that had been misstated or forgotten during the month-end closing activity. Assignment #2 Phillips second assignment was to conduct a review on Bookstore Investment cycle.
In conducting his review Phillip primarily worked with Roger Russell the treasurer of Bookstore. The following information was contained in Phillips report. General Throughout the year, BC has made short term and long-term investments in securities; all securities are registered in the company’s name. According to Bookstore’s bylaws, long term Investment activities must be approved by Its Board of Directors, while short-term Investment actually may be approved by the president or the treasurer.
Transactions I purchases Ana sale AT snort-term cruelties In 2010 were made Day ten treasurer. Two long-term purchases and one long-term sale were executed by the treasurer, the purchases were approved by the Board and the sale was approved by the president. The treasurer is listed with the broker as the company contact and receives all revenues from related investments. The cheeses are then forwarded to accounting for processing. Documentation Purchase and self authorizations along with broker’s advices, are maintained in a file by the treasurer.
The certificates for all long-term investments are kept in a safe deposit box at Jamaica Homeland Bank and only the president of BC had access. An inventory of this box was made and all certificates were accounted for. Certificates for short-term investments are kept in a locked metal box in the accounting office long with long-term contracts and legal agreement. The keys to this box are kept by the president, treasurer and the accounting manager. All accounting staff use the accounting manager’s key to gain access to the box when required.
Documentation for two of the current short-term investments could not be located in this box. The accounting manager explained that some of the investments are for short periods of time and that formal documentation is not always provided by the broker. Accounting records Deposits of cheeses for interest and dividends made by the accounting department re not traceable to the cash receipts Journal maintained by the person who opens the incoming mail. Cheeses drawn for investment purchases for amounts in excess of $250,000 are authorized by the treasurer and the president.
However, cheeses for $275,000 and $255,000 drawn during the period under review were signed by the treasurer only. Each month the accounting manager and the treasurer prepare the journal entries required to adjust the short-term investment account. There was insufficient back-up documentation attached to the Journal entries reviewed to trace al transactions, however the balance was closely approximates the amount on the statement received from the broker. The treasurer is also has the responsibility to reconcile the accounts.