Internal Audit Department
Common Audit Findings
Lack of Reconciliation Procedures
The monthly accounting reports represent the official records of the institution. All transactions recorded in the accounting reports should be reviewed and verified on a monthly basis by the department chair, director or office manager. This review represents the final detective control in the accounting system.
Inadequate Segregation of Duties
A fundamental element of internal control is the separation of duties so that one individual cannot perpetuate and conceal errors and irregularities in the normal course of his/her duties. Strong internal controls require the segregation of responsibilities for authorizing transactions, physical custody of assets and the related record keeping. For example:
- One individual should not have the ability to order, receive, approve for payment and verify charges to the monthly accounting report.
- One individual should not have the ability to receive payments through the mail, prepare the deposits, reconcile the bank statements, and post payments to the receivable system.
Lack of Written Departmental Procedures
All aspects of a department's operations should be clearly documented in an up-to-date procedures manual. The lack of complete written procedures increases the risk of loss of funds, theft of University assets, and disruption of the operation. Written procedures are also beneficial for the training of current and new employees and are a valuable resource in the event an employee leaves the department. The procedures should include sufficient information to permit an individual who is unfamiliar with the operations to perform the necessary financial activities.
Absence of Adequate Supporting Documentation
All transactions should be supported by adequate documentation. This documentation should include proper authorization and enough detail to provide a trail for future reviews/audits.
Noncompliance with State, System, University, or Departmental Policies and Procedures
All employees should be familiar with applicable policies, procedures and laws, etc. and should strive to conduct University business in accordance with them.
Lack of Control Over Capital Equipment
Each department is responsible for ensuring that the inventory data is kept up-to-date on all new purchases and any dispositions. Proper forms (surplus property) should be completed in a timely fashion so that the University's inventory system is accurate.
Common audit issues
Deposits not made within 7 days of collection.
- According to Wisconsin State Statute 20.906 (1): "Frequency of deposits. Unless otherwise provided by law, all moneys collected or received by any state agency for or in behalf of the state or which is required by law to be turned into the state treasury shall be deposited in or transmitted to the state treasury at least once a week and also at other times as required by the governor or the state treasurer and shall be accompanied by a statement in such form as the treasurer may prescribe showing the amount of such collection and from whom and for what purpose or on what account the same was received. All moneys paid into the treasury shall be credited to the general purpose revenues of the general fund unless otherwise specifically provided by law."
Invoices being approved by initials.
- Initials are easily forged and could allow for unauthorized payments. Invoices should have a signed approval.
Lack of supporting documentation for deposits.
- Supporting documentation should be kept for all deposits so that they can be reconciled and to leave a good audit trail.
Expenses and revenues are not reconciled to the financial statements.
- Expenses and revenues should be reconciled to the financial statements to ensure that the transactions are being processed for the correct amounts.
Inventory records not properly maintained.
- There should be a inventory record set up to track inventories. The inventory record should be updated regularly to ensure its accuracy. Properly maintained inventory records help to safegaurd an organization's assets.
- Capital equipment inventory records should also be updated regularly to ensure their accuracy. For a current definition of what is considered to be capital equipment go to http://www.uwsa.edu/fadmin/fppp/fppp33.htm.