Violation of Internal control principles

Internal control principles violated. The idea of good record keeping, which emphasizes the necessity for accurate financial statements backed by ledger reports, is violated by the bad accounting system of record keeping. Fraud and mistakes are reduced in this way.

Cash receipts that are deposited late contradict the control principles of sufficient authorisation. This is because the lack of defined guidelines for financial transactions, including those who are able to approve such activities, might result in deposits being received late (Weaver, 2013).

The idea of using technology controls is violated by overly old and excessive accounts receivable amounts. For displaying past performance and other financial characteristics, technology, data backup, retrieval, and warnings are required. Failure to use such tools is the cause of accumulation of past accounts receivable balances (Texas Tech university, 2017).

Disregard for early payments for discounts on invoices goes against the aspect of verification. While ignorance of payments may be due to an error, there is always the responsibility to verify and review all accounts for accuracy or unpaid discounts and invoices.

Late payment of accounts payable (sometimes due to lack of cash) possibly violates the internal control virtue of access. In this case, authorized employees who have access to company assets are tasked with the burden of ensuring the availability of funds when needed.

Lax appropriate segregation of duties defies the principle of service separation. Segregation of duties tends to reduce the opportunity for fraud as well as errors.

Relaxed rules on accounting principles application violate the principle of an adequate accounting structure. In the absence of clear structures and policies, there is every likelihood of failure in the organization.

Unqualified supervisor and management is against the standard that requires the presence of highly competent personnel with integrity should be hired and properly trained

Inadequate control on director and management overrides is against the internal control code that specifies the actions taken only by specific individuals within their authority.

Lax oversight by the external board of directors is completely against the principle which is based on the need for the senior management officials to frequently review the financial operations as well as the internal controls (AuditNet, 2017).

Recommendations

Poor Accounting System of Record Keeping

Ensure that documents required for financial transactions are standardized. Such documents include invoices, internal requests, inventories, receipts and other financial reports. Doing so facilitates maintenance of consistency in record keeping and also makes the retrieval and review of previous records easier and faster. Additionally, any transactions made should be recorded immediately.

Late Deposits of Cash Receipts

Specific managers should be appointed to authorize the financial transactions required promptly. Additionally, these managers are responsible for accounting records by making sure these operations are seen and approved by the relevant officials.

Excessive Aged and High Accounts Receivable Balances

The best way to deal with this issue is performing random accounting reconciliations to match balances in the accounting system with those in other entities such as banks, clients, and suppliers among others. Technological controls, physical security, and backups come in handy for the detection of past balances (Weaver, 2013).

Late Payment of Accounts Payable (Sometimes Due To Lack of Cash)

Ensure the relevant individuals having access to the financial assets have the clearance to make payments and avail cash at the right time. Access logs and tracking systems can help to prevent unauthorized access for fraudulent purposes.

Lax Appropriate Segregation of Duties

In this case, it is critical for the company to develop an organizational plan that clearly outlines the levels of authority, the delegation of functions and responsibilities as well as the segregation of incompatible functions and duties. Duty separation prevents frauds and ensures accuracy as the work is reviewed through responsibility sharing.

Relaxed Rules on Accounting Principles Application

Developing an information reporting structure is the key to ensure that managers are liable for progressive assessment of all the internal controls and make recommendations where necessary.

Unqualified Supervisor and Management

The organization must change its recruitment strategy in a manner that ensures the selection of competent personnel with proven integrity. Also, training must be offered to improve their skills and capabilities.

Inadequate Control on Supervisor and Management Overrides

Here, access to assets must be restricted to particular individuals alone, preferably on a need-to-know basis. Also, actions should be performed by those responsible alone.

Lax Oversight by External Board of Directors

The board of directors must take charge and improve their oversight role by reviewing the organization's financial and structural position regularly and frequently in an independent manner (Texas Tech university, 2017).

References

AuditNet. (2017). Internal Controls Primer. Retrieved from AuditNet: http://www.auditnet.org/audit-library/auditnet-internal-controls-primer

Texas Tech university. (2017, January 5). Basic Principles of Internal Control. Retrieved from elpaso: https://elpaso.ttuhsc.edu/opp/_documents/50/op5003a.pdf

Weaver. (2013, December 30). COSO Framework’s 17 Principles of Effective Internal Control. Retrieved from Weaver: Assurance, Tax, Advisory: https://www.weaver.com/blog/coso-framework%E2%80%99s-17-principles-effective-internal-control