Jamona.Com's Internal Control Procedures Have Term Paper

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Once the invoice is received, the accounting personnel should check if it matches the pending purchase order. The data introduced in the accounting system should roughly include the following: the current date, the invoice date, the purchase order number, the General Ledger account number and the amount of the actual invoice.

The check must be completed and any supporting documentation should be attached and forwarded to the Office Manager for approval before the actual check can be processed or made. As for the status of the check, the Accounts Payable Department should be contacted if there are any difficulties and questions. Any supporting document might also be mailed with the check by the AP Department, should the requestor make such a demand.

Various problems regarding checks might arise. For instance, a check is deemed invalid and voided if there is an error in the payee amount, if the error occurred during the printing of the check, if a duplicate payment has been made, if the cancellation of the payment is requested, or if there is any other reason for which the check cannot be sent to the payee. The procedure should be as follows: immediately after determining that a check should be voided, the responsible person should mention it on the face of the check (write "VOID," for instance), write a brief explanation regarding why the check was not issued on the stub of the check, and remove or cut the signature from the check. A controller has to process and journalize the checks voided by the Accounts Payable Department.

Adequate segregation of accounting duties is an excellent way of fighting against fraud. The person who records cash receipts (including checks) should not also record the accounts receivable activity. The person who prepares or approves payroll should not be the one to distribute payroll checks. The person who prepares accounts payable checks should not prepare the organization's bank reconciliation.

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The reconciliation of the bank statement is an important operation, since it helps detect total outstanding checks added incorrectly, total deposits in transit added and bank balance written down incorrectly, failure to record all items, failure to record a check or deposit or incorrect recording of an amount. Since reconciliation of the bank statement also helps detect fraudulent maneuvers accomplished by AP employees, for instance, this process should be supervised by the Office Manager or his/her appointee, if total segregation of duties is not possible.

There are various types of control implemented at Jamona.com Preventive controls, for instance, are designed to discourage errors or irregularities. Reviewing of the purchases by the manager for propriety and validity prior to approval prevents inappropriate expenditures is an example of such a control. The Account Payable Department is also responsible for reviewing the contents of the invoices, in Jamona.com's case. A computer application that automatically checks the validity of documents prevents the entry of invalid account numbers, for instance, may also be used. All the proposed authorization measures are also applications of preventive control, since their purpose is to remove any possible source of error or fraud.

Detective controls are implied by the verification of the contents of packages received from suppliers, the matching of the invoices and purchase orders, the checking (by the Office Manager, preferably) of the bank statements, the reconciliation of the statements (also by the Office Manager, if possible).

As for corrective controls, any action taken by the Accounts Payable department or the Office Manager to remove an error and fix the consequences thereof might be classified as a form of corrective control.

Reference:

1. Duane Reyhl, "Protecting Your Company from Employee Fraud, www.ahpplc.com/Reference/articles/fraud-prevention-tips.htm

2. Internal Control Procedures, Indiana University, www.indiana.edu/~iuaudit/controls.html

Duane Reyhl, "Protecting Your Company from Employee Fraud, www.ahpplc.com/Reference/articles/fraud-prevention-tips.htm.....

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