Colorado Springs Company's Internal Control
Option #1: Colorado Springs Company?s Internal Control
Colorado Springs Company (CSC) is a WHOLESALER with fiscal year ended December 31 of previous year. Since it is publicly-traded, it undergoes external audit. The most recent audit was completed in February of this year. As part of the audit of the financial statements, the auditors tested the effectiveness of management?s assessment of internal control over financial reporting. The auditor found out that existing internal controls were inadequate. Specifically, CSC?s accounting system for sales, cash receipts, accounts receivables, and accounts payable had material weakness. The audit revealed that there were:
Poor accounting system of recording keeping
Late deposits of cash receipts
Excessive aged and high accounts receivable balances
Disregard for early payments for discounts on invoices
Late payments of accounts payable (sometimes due to lack of cash)
Lax appropriate segregation of duties
Relaxed rules on accounting principles? application
Unqualified supervisor and management
Inadequate control on supervisor and management overrides
Lax oversight by external board of directors
For each finding above, indicate internal control principle that CSC violated.
For each finding above, provide an appropriate recommendation for CSC to correct the weakness.
Your response should include two to three pages of written text in addition to any calculations and solutions you offer to support your thinking. Document formatting and any citations should conform to CSU-Global Guide to Writing and APA Requirements.