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CITY OF SAN LEANDRO <br />MEMORANDUM ON INTERNAL CONTROL <br />JUNE 30, 2012 <br /> <br />SCHEDULE PRIOR YEAR OF OTHER MATTERS <br />Review Draft 6/18/2013 5:11:57 PM <br /> <br /> <br />2011-01 Evidence of Journal Entry Review Being Reviewed <br /> <br />Criteria: <br /> <br />The City should maintain segregation of duties and adequate controls by ensuring that the person <br />charged with reviewing journal entries does not prepare and post them as well. The City should <br />also make some type of mark on the journal entry voucher to show the person reviewing is <br />separate from the person preparing and posting the entry. <br /> <br />Condition: <br /> <br />During our interim audit testing of 40 journal entries for segregation of duties and adequate <br />controls in the journal entry process, a total of 3 discrepancies were noted. 2 of the selections <br />were found to be missing proper approval prior to being posted; and 1 sample was prepared and <br />approved by the same person. After interim, the City went back and reviewed all journal entries <br />to ensure that they were all properly reviewed and authorized. During the final phase of the audit <br />we selected an additional 20 journal entries to be tested and noted no discrepancies. <br /> <br />Effect: <br /> <br />Unapproved changes could be made to journal entries or erroneous journal entries may be made <br />posted without detection and potentially leading to material misstatement in financial reporting. <br /> <br />Cause: <br /> <br />For the above noted journal entries, the City did not have segregation of duties in order to ensure <br />that the person reviewing journal entries did not post and prepare them as well. The person who <br />reviewed and approved the journal entry prior forgot to initial on the face of the journal entry <br />voucher to document that that it was reviewed and approved. <br /> <br />Recommendation: <br /> <br />The City should implement a procedure where journal entry vouchers contain evidence of review <br />and approval on the face of the document prior to being posted. There should be segregation of <br />duties and so that the journal entry preparer cannot also approve or review the same journal entry. <br /> <br />Current Status: <br />There is segregation of duty to ensure in the supervisor approved budget adjustments and journal <br />entry of the preparer. We’ll make sure that all journals entries and adjustments will be approved <br />by someone other than the preparer. <br />