Internal controls play an of import function in any organisation. This paper will discourse how the internal controls came approximately in the accounting universe. As stated in this paper, the Sarbanes- Oxley Act of 2002, made regulations and ordinances that companies have to follow to keep honorable fiscal audits. This paper will besides discourse my findings in the Vance County School District paysheet processing processs. My aim was to find if the Vance County School District ‘s internal controls over the paysheet processing operation was suitably designed and runing efficaciously.
Unlike many other professions accounting has a long history, which is discussed and describe through the double-entry accounting. The history of accounting began with the mastermind of a Renaissance adult male named Luca Pacioli. Turning up during a clip where few people could read or compose, Pacioli made his grade in history. Pacioli had the cognition of history, literature, scientific discipline, art, concern and mathematics, in which all contributed to his book.
In 1494, Luca Pacioli wrote and published a book called Summa ( The collected Knowledge of Arithmetic, Geometry, Proportion and Proportionality ( deSantis, 1999 ) . The book consisted of five subdivisions and merely 26 where on double-entry accounting. Pacioli did non invent double-entry accounting, he merely made a system that was easier to utilize. The Summa was written as counsel to the bing cognition of mathematics. Luca Pacioli accounting system included all of the accounting characteristics that we use today. These characteristics included diaries, legers, memorandas and etc. ( deSantis, 1999 ) . He besides described the twelvemonth terminal shutting entries and proposed a test balance to be used to equilibrate legers. Over the past decennaries there has been small alterations done to his accounting systems. Some of these alterations included the income statement in which was developed before the WWII and in 1886 our present twenty-four hours test balance sheet was really formed ( deSantis, 1999 ) . By the 1980 ‘s fiscal statements were in topographic point.
Fiscal statements provided significant information on the operating,
puting and financing act Hedera helixs of an organisation. investment and funding act Hedera helixs of an organisation.
During the 14th and 16th centuries, the achievements of the Italian Renaissance work forces soared to new highs. They are known worldwide in the accounting profession as the male parents of modern accounting. During this Era, Venice was the bosom of Europe and it was here that merchandisers invented and practiced double-entry accounting ( deSantis, 1999 ) . The Italians took Arabic Numberss and used them to their benefit. They became the first to utilize them in tracking concern histories. The Italian merchandisers kept extended concern records as the usage of capital and recognition on a big graduated table developed ( Alexander, 2002 ) .
What are internal controls? Harmonizing to ( Landes & A ; Ratcliffe, 2009 ) , internal control is a procedure, effected by an entity ‘s board of manager, direction and other forces, designed to supply sensible confidence sing the accomplishment of aims in the undermentioned classs:
- Effectiveness and efficiency of operations
- Dependability of fiscal coverage
- Conformity with applicable Torahs and ordinances
Internal controls are designed to assist concerns with accomplishing their aims. Internal controls have been around in concerns for the past decennaries. . A system of internal controls is put into topographic point to any organisation on class toward profitableness ends and accomplishment of its mission and to minimise surprises along the manner ( Landes & A ; Ratcliffe, 2009 ) . The internal control construction is a system that needs uninterrupted betterments and organisations are ever seeking to happen ways to implement a better and effectual construction.
The Sarbanes- Oxley is a jurisprudence that was enacted on July 30, 2002 as a reaction to the many accounting dirts that plague a figure of major corporations such as Enron, WorldCom, Tyco International, Adelphia and Peregrine. These corporations are the ground that regulations, ordinances were put into topographic point. The Sarbanes-Oxley is a demand for most public companies. The Sarbanes-Oxley chief intent is to modulate corporate behaviour to guarantee the protection of fiscal audits. Section 404 of the Sarbanes Oxley Act, requires that all direction file an internal control study with their one-year study, corroborating the effectivity of internal controls and processs over fiscal coverage ( Norris, 2009 ) . The Sarbanes-Oxley Act besides requires that hearers attest this rating of effectivity. The Federal Foreign Corrupt Practices Act of 1977 is a legal demand for many organisations. This act requires companies who file studies to the Securities Exchange Commission to their books and records accurately reflecting concern minutess every bit good as maintain effectual internal controls ( Dworsky, 2009 ) .
There are five constituents of the internal control construction. The constituents of the internal control construction or the COSO Framework are risk appraisal, control environment, control activities, information and communicating and monitoring. The internal control construction is of import to any organisation because if the system is implemented decently the organisation can place and rectify control jobs on a timely footing, bring forth more accurate and dependable information for the usage of determination devising, fix accurate and timely fiscal statements, and be in a place to supply periodic enfranchisements or averments on the effectivity of internal control ( Landes & A ; Ratcliffe, 2009 ) . Of the five internal control constructions, the control environment plays an of import function. The control environment helps guarantee that internal and external coverage is in conformity with Torahs and ordinance. There are seven of import factors under the control environment section that help set up and heighten an organisation ‘s policy and processs ( Bodnar & A ; Hopwood, 2004 ) . The factors included under this sections are: policies and processs of human resources, organisation construction, unity and ethical values, committedness to competence, direction doctrine and operating rhythm, mode of delegating authorization and duty and attending and way provided by the board of managers. There can non be an effectual internal control environment. The control environment helps safeguard the investings of portion holders every bit good as company assets.
The company that I chose to research was the Vance County School System paysheet procedure working with one school in peculiar which was Eaton Johnson Middle School. The Vance County School District is governed by the Board of Education which has seven elected members. The board is responsible for the general direction and control over the territory ‘s fiscal and educational personal businesss. The Superintendent is responsible for the inadvertence of the District ‘s internal control construction and acts as the Chief Financial Officer. There are 16 schools under the Vance County School District. There are 10 simple schools, 2 in-between schools and 4 high schools. I will analyze Vance County School District to see if they established proper controls over its paysheet processing process.
Because there are so many schools in this territory I chose to concentrate on one entity which is Eaton Johnson Middle School. The bookkeeper retrieves paperss from staff members daily such as leave of absence signifiers and clip rectification signifiers to input day-to-day attending ; including, repairing any corrections that need to be made due to person non timing in or out for the twenty-four hours. She has to manually look into each employee ‘s clip to do certain they have clocked in for the twenty-four hours and manually identify in clip and corrections on on-line clip clock package called Timekeeper.
The paysheet processing starts when the wage period is due to Corporate and the processs are as follows: the bookkeeper go in to Timekeeper to look into for lost yearss of scanning in or out, repair any mistakes, print timesheets for both 10-month employees ( instructors, TAs, some Counselors ) and 12-month employees ( Office staff including bookkeeper, Data Manager, Receptionist, Principal, Asst. Principals ( 3 ) , and Counselors ( 2 ) , Band manager, and Custodians ( 7 ) . The bookkeeper so hold all Non-Certified staff ( TAs, Custodians, Office Clerical ) and Certified staff ( Principal, Asst. Principals, Counselors come subscribe his or her timesheet is right. Once timesheets are approved by employees as being right and they are signed ; so, the Principal must besides subscribe behind each employee. Once everything is approved, the bookkeeper must travel into Timekeeper and O.K. all timesheet to be pulled by Human Resources Finance/Payroll Department for treating. Then the bookkeeper must besides take a transcript of her paysheet timesheet and go forth signifiers to Payroll section every bit good. The paysheet supervisor at the corporate office so retrieves the information via package download. Once the information is retrieved, a pro forma is run to verify/ edit/ right informations. Payroll information is so entered in to ISIS paysheet informations package. Once all information has been entered, verified, edited, and correct, another “ pro forma ” is run to lock in right informations. The paysheet informations is so sent to the finance director electronically. Once approved, paysheet cheques and pay stubs are so processed and sealed for distribution. Payroll cheques and paystubs are placed in a locked hard currency bags and delivered on wage twenty-four hours to each school by the school systems courier service. Merely the bookkeeper and Payroll Supervisor have a key to the hard currency bag.
I could merely travel on what information the paysheet specializer of Vance County School District would give me. They seem to hold good internal controls in topographic point. I could merely establish my findings on the information provided to me. The lone lack at manus was that the paysheet section had no written policies or processs for their paysheet procedure. Although written policies are non lawfully required, they are reasonably much needed in any organisation to assist an employee set up a good religion conformity with federal and province Torahs. Written paysheet policies and processs combined with the occupation descriptions of employees can assist guarantee that paysheet is processed systematically and accurately. District functionaries did non set up written processs that describe employee duties in processing and administering monthly paysheets. In the absence of written policies and processs, the paysheet supervisor developed and implemented her ain informal processs to treat paysheet. My recommendation would be that Vance County School District adopts a written paysheet policy and processs to be used by the employees in corporate office who are responsible for processing and distributing paysheet.
Payroll processing maps play an of import function to guarantee internal control for the accurate expenses of salary, rewards and other support are conformity with policies and processs and federal ordinances. A sample written payroll process policy for Vance County School District would be as follows:
- All paysheets are processed through ISIS.
- Payroll Supervisor receives approved informations via Timekeeper package besides a difficult transcript from the District ‘s section bookkeepers for readying of paysheet.
- Payroll Supervisor verifies payroll informations and inputs informations into the ISIS system.
- HR section maintains clip and attending back uping paperss for sanctioned absences, professional leave, mourning leave and etc.
- Payroll Supervisor reappraisal, O.K. alterations, add-ons and omissions through HR actions.
- Payroll Supervisor so bring forth a lock in paysheet tally to treat payment expense,
- Payroll Supervisor must import, cipher and verify ; go forth taken, garnishments, and pay accommodations.
- The Finance Manager must O.K. paysheet upon expense.
- Checks and Paystubs are sorted and delivered by Courier to each school for bookkeeper to pay out.
Organizations today have to come up with ways to implement better controls over their sections. Even though the Payroll Supervisor did non hold written policies and procedures the District has non had any jobs to originate. If they adopt a written policy paysheet processs or a policy for any section in the District, they can forestall any mistakes in their internal control construction. An effectual internal control construction can restrict many deceitful Acts of the Apostless within the organisation. Having a good implemented control environment can assist the organisation win in the precaution of companies ‘ assets and bar of fraud.
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