Proposal for Internal Controls

Proposal for Internal Controls

Casey L. Stewart, Aundriel Potier, Ajesh Shah,

Brenda Weier, Bandana Hamal

ACC/544

March 12, 2012

Joseph Poletti

Proposal for Internal Controls

Internal controls mitigate risk by holding certain staff accountable for certain activities, limiting access to sensitive materials, and documenting who (employees, clients, shareholders, etc...) has access to the firm’s assets. This report recommends internal controls for production, inventory, sales, cash, and A/R. When followed entirely, this proposal’s directions will leave the appropriate paper trail for auditing the financial statements of a firm that sells finished goods directly to customers.

Inventory Audit

* Observe physical inventory

* Inspect premises to determine inventories are adequately safeguarded against access by unauthorized personnel.

* Inventories are in good condition, housed in enough storage space, packed in bins, and easy to perform a count.

* An inventory clerk will identify the damaged, scrapped, and obsolete items and place them in a separate place.

* Scan for unusual items, items at other locations, and items in transit.

* An inventory clerk will identify inventories owned by third parties and place them separately from other inventories.

* Observe inventory count

* An authorized person, in the presence of an internal or external auditor, will carry out a physical count of the inventory.

* Disclosure of the count number will not be made known to the authorized person performing the physical count.

* An inventory tag or sheet will contain the quantities and information of the inventory products.

* An inventory clerk shall maintain and account for used and unused inventory tags and count sheets. Make a copy of the entire count sheet prevent possible manipulation of count sheet by addition, deletion, and alteration (completeness).

* The total count should be checked by an individual other than the...