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Internal Controls

Internal Controls. Towson University Management Advisory and Compliance Services. Internal Controls. effectiveness and efficiency of operations reliability of financial reporting accomplishment of established goals and objectives compliance with laws and regulations

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Internal Controls

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  1. Internal Controls Towson University Management Advisory and Compliance Services

  2. Internal Controls • effectiveness and efficiency of operations • reliability of financial reporting • accomplishment of established goals and objectives • compliance with laws and regulations • safe guarding university assets Processes that provide reasonable assurance regarding the achievement of the following objectives:

  3. The possibility that an organization will NOT: Risk • achieve its goals • operate effectively and efficiently • protect itself from loss • provide reliable financial data • comply with laws and defined policies • safe guard assets

  4. It is a Balancing Act!

  5. What are your responsibilities?Are you held accountable? You can delegate some of the duties you are responsible for, but cannot delegate accountability!

  6. Control Activities Overview Reasonable assurance Who is responsible? YOU! The trust issue Preventive vs. detective controls

  7. Key Control Activities • Creation of a control conscious environment • Segregation of duties • Authorizations, approvals, and verifications • Control over physical and intellectual assets and records • Monitoring

  8. Tool #1: Control Conscious Environment • Integrity and ethics • Commitment to competence • Leadership’s philosophy • Organizational structure

  9. Tool #2:Segregation of Duties • Functions are divided so that no one person has control over all parts of a transaction. • Segregation of duties is a preventive control that aids in the timely detection of errors and irregularities in the normal course of business.

  10. Functions to be Separated • Authorizing transactions • Reconciling transactions • Custody of assets • Recording transactions

  11. Examples of Higher Risk Transaction Types • Purchase of Goods • Purchase of Services • Cash Receipts • Payroll • Procurement Card • Inventory

  12. Tool # 3: Authorizations, Approvals, and Verifications • Limit authorization authority • “Rubber Stamping” • Secure access to electronic signatures or other signatory devices • NEVER, NEVER, NEVER sign a blank form • Develop written procedures outlining delegation guidelines

  13. Periodic asset counts Periodic comparisons Investigation of discrepancies Physical safeguards against theft and fire Tool # 4: Asset Control Activities

  14. Tool # 5: Monitoring Monitoring is a detective control that aids in identifying losses, errors or irregularities. “But I’m so busy…”

  15. 5 Control Tools • Control Conscious Environment • Segregation of Duties • Authorizations, Approvals, and Verifications • Control over Assets • Monitoring

  16. “RED FLAGS” OF FRAUD • No vacation • Voluntary overtime • Unexplained variances • Complaints • No reconciliation • One employee “does it all” • Documentation is not original • “Rush” requests

  17. Questions For additional information: Management Advisory and Compliance Services Towson UniversityAdministrative Building room 2078000 York RoadTowson, MD 21252 410-704-2114

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