INTERNAL CONTROL QUESTIONAIRE

ACCOUNTS PAYABLE, ACCURED LIABILITIES, AND OTHER LIABILITIES

Objectives: To ascertain that controls exist to insure that all current unsecured liabilities are properly identified and recorded. 1. Are the liability control accounts reconciled at frequent intervals (at least monthly) with subsidiary records? 2. Are bid deposits and similar receipts properly recorded and recognized as liabilities when received? 3. Are accounts payable maintained independently of cash receipts and disbursement functions? 4. Is there a system for comparing the invoice, purchase order, and receiving report prior to entry of the account payable in the accounting record? 5. Are accounts payable adjustments properly: a. Reviewed? b. Approved? 6. Are year-end cutoff procedures adequate to insure inclusion of all items purchased during the period? 7. Does a policy exist that requires payments to vendors be made within the discount period in order to take advantage of all offered discounts? 8. Are lost discounts properly recognized in the accounting system? 9. Do procedures exist to prevent duplicate payments? 10. Are procedures adequate to avoid duplication of payments for transportation charges? 11. Are returned purchases controlled in a manner which assures proper credit? 12. Do procedures preclude payment for damaged or spoiled goods? 13. Are debit balances in accounts payable reviewed?

ACCOUNTS RECEIVABLE
Objectives: To ascertain that controls exist to insure that all unsecured amounts due the organization are properly identified and recorded. 1. Are credit and collection policies in writing and properly approved? 2. Are accounts receivable maintained independently of cash receipts and disbursement functions? 3. Are noncash credits, bad debt write-offs, credit memos and allowances: a. Approved independently of processing, recording, and collecting the charge? 4. Is the total of the individual accounts independently reconciled at least monthly with the control account(s)? 5. Are accounts aged periodically? a. Are aged accounts reviewed by a responsible official? b. Are charge documents controlled and properly accounted for? 7. Are all valid receivables promptly recorded? a. Examples are expenditures under cost reimbursement contract, freight damage, shortages, and returned merchandise. 8. Are all claims for such items as freight damage, shortages, and unsatisfactory merchandise: a. Recorded on the books or otherwise controlled, as soon as the claims are prepared for filing? b. Billed currently? 9. Do adequate procedures exist for follow-up and collection of delinquent accounts? 10. Are appropriate measures in force to insure prompt collection of employee and student accounts receivables? 11. Are there controls to insure that individuals with delinquent accounts are precluded from receiving additional credit? 12. Are accounts receivable balances independently confirmed on a periodic basis? 13. Are credit balances reviewed periodically? 14. Is there adequate control over the mailing of statements to prevent interception prior to mailing? 15. Are disputed liabilities handled by person(s)other than those receiving payment?

CASH DISBURSEMENTS
Objectives: To ascertain that controls exist to insure that cash disbursements are properly authorized, supported by adequate documentation, and properly executed. Check Disbursements 1. Is there adequate segregation of duties between the approval and payment functions as to: a. Approval of documents for payment? b. Check preparation? c. Check signing? d. Access to cash?

e. Access to accounting records? 2. Are all cash disbursements, except those from petty cash, made by check? 3. Are only printed pre-numbered checks used and properly controlled? 4. Are voided checks properly mutilated and held for inspection? 5. Are all checks protected against alteration? 6. Are all checks made payable to a specific payee? 7. Is the signing of checks in advance prohibited? 8. Are all disbursements properly authorized and supported by appropriate documentation? 9. Are all bank accounts and check signatures properly authorized? 10. Is there adequate review of supporting documentation before checks are signed? 11. Are there dollar limits on: a. Single signature checks? b. Signatures mechanically fixed? 12. Are the signers of checks bonded? 13. Do procedures provide for immediate bank notification when an authorized signer of checks changes duties or resigns? 14. Is the supply of blank checks adequately controlled? 15. If a mechanical check signer is used, are facsimile signature plates under proper control? 16. Is there a firm procedure establishing the conditions under which cash disbursements will be made? 17. Are all paid invoices or other authorized documents adequately cancelled so as to prevent their reuse? 18. Are vouchers prepared for all expenditures? 19. Is each bank account under separate ledger control? 20. Are bank accounts reconciled monthly by a person who is independent of the cash function? 21. Are bank statements delivered unopened directly to the reconciler? 22. Is the sequence of check numbers accounted for when reconciling the bank accounts? 23. Are endorsements on cancelled checks periodically examined, incidental to the reconciliation of the bank account? 24. Are paid checks scrutinized for suspicious and irregular features? 25. Do adequate procedures exist for the disposition of old outstanding checks?

PETTY CASH DISBURSEMENTS

1. Is the petty cash fund: a. Properly authorized? b. The responsibility of only one person? c. Properly safeguarded? d. Controlled by an imprest system? 2. Are petty cash vouchers: a. Signed by the person receiving the cash? b. Prepared in ink and required for each expenditure? c. Supported by an invoice with the amounts spelled out? 3. Are the reimbursement vouchers approved by a responsible employee who has no direct access to cash? 4. Are the vouchers and attachments properly cancelled to preclude their reuse? 5. Is the fund verified by surprise counts? 6. Are IOU's unauthorized advances, and personal checks prohibited? 7. Are petty cash funds restricted to expenditures not exceeding a fixed amount? 8. Are reimbursements made payable to the fund custodian? 9. Is the custodian prohibited from handling more than one fund or other cash receipts? 10. Are petty cash fund balances adequate for the activity's needs?

TRAVEL DISBURSEMENTS
1. Is the authority for approval of travel requests established at all organizational levels? 2. Are all travelers familiar with the institution's travel regulations? 3. Does the fiscal officer or an appointed agent approve all travel vouchers? 4. Are travel vouchers independently reviewed for allowability and reasonableness? 5. Is the fiscal officer's travel voucher approved by his or her superior?

CASH RECEIPTS
Objectives: To ascertain that controls exist to insure that cash received is properly accounted for and deposited. 1. Are all cash receipts recorded through the use of pre-numbered receipts (or cash registers) by an individual designated to receive cash? 2. Are cash register procedures in writing? 3. Do cash register procedures reflect proper daily check-out and documentation?

4. Does someone independent of cashiering and accounts receivable open mail? 5. Is there adequate separation of duties: a. Between the cashiering function and the cash disbursements function? b. Between the cashiering function and the accounts receivable function? 6. Is accountability and responsibility for checks and cash received through the mail established immediately on receipt and maintained through deposit in the bank? 7. Are banks and institutional cashiers instructed not to cash checks made payable to the college or university? 8. Are cashiers' daily cash reports subjected to supervisory review and approval? 9. Is a restrictive endorsement placed on incoming checks as soon as they are received? 10. Are instructions given to persons writing checks to make checks payable to the college or university? 11. Are receipts which are given to individuals who deposit cash with the cashier: a. Prepared in multiple copies? b. Identifiable to a specific cashier? c. Dated? d. Numerically controlled? 12. Are the duties of employees connected with the cash receipts function rotated periodically? 13. Is a record of cashiers overages and shortages: a. Maintained? b. Regularly reviewed? c. Recorded on the books? 14. Are locked-in audit copies of receipts used where appropriate? 15. Is there daily posting of cash receipts to subsidiary accounts receivable records? 16. Are cashiers provided separate cash drawers to establish accountability and are these drawers locked during the cashier's absence? 17. Do procedures prohibit the disbursement of cash from cash receipts prior to their deposit? 18. Are cash receipts deposited intact daily and without delay? 19. Are adequate physical facilities provided for safeguarding cash prior to deposit? 20. Are safe combinations and keys to cash boxes or files restricted to an essential number of employees? 21. Are safe combinations or locks to files changed periodically and at each personnel change? 22. Are bank deposits verified by means of a duplicate deposit slip or other means? 23. Are checks returned by the bank controlled and is follow-up maintained independently of the cash function? 24. Are the following cash register controls used: a. Locked-in-totals? b. Visible amount of sale? c. Bell that signals sale and opening of cash drawer? d. Receipt given to customer? e. Over-or-under-ring vouchers signed by customer and supervisor? f. Voided copies of receipts retained for audit purposes? 25. Are all persons who handle cash adequately bonded? 26. Are records of revenues such as rents, interest, dividend, etc., adequately controlled so that their non-receipt would be noted and investigated?

INVENTORIES
Objectives: To determine that adequate controls exist to insure that all inventories are properly reported, safeguarded, and accounted for. 1. Is there separation of duties between persons who handle the inventories and those handling: a. Inventory records? b. Sales billings? c. Recording of purchases? 2. Are inventories under the physical control of designated individuals who are held responsible for quantities on hand? 3. Are receiving, issuing, accounting, and storing responsibilities properly separated? 4. Are materials released from the storeroom only on receipt of approved requisitions? 5. Is a central storeroom and receiving station maintained? 6. Are all incoming shipments, including returns by customers, handled by a central receiving department? 7. Are purchases made by requisition/purchase order only? 8. Are the storerooms or storage areas properly safeguarded or controlled to prevent access to materials by unauthorized persons? 9. Is a record kept on keys to storerooms, storage areas, etc.? a. Is this record checked periodically? 10. Has adequate protection against spoilage and pilferage been provided for, with special care being given to sensitive items?

11. Are pre-numbered receiving reports used and copies thereof forwarded to the accounting department? 12. Are issuing and billing procedures designed and correlated so as to insure the billing of all items? 13. When inventories are to be taken, are adequate written procedures prepared? 14. Is there proper cutoff of inventory receipts and issues during inventory counts? 15. After the inventory is counted, are the count tags, sheets, etc., properly controlled? 16. Are inventory counts verified by persons independent of those in charge of the inventory records? 17. Are responsible officials advised of significant inventory discrepancies? 18. Are perpetual records adjusted for discrepancies? 19. Are obsolete, damaged, and slow-moving items reported to a responsible person? 20. Are scrap material inventories properly controlled? 21. Are goods that are consigned in and out accounted for properly? 22. Is there physical segregation and proper accounting control of merchandise on hand that is not the property of the institution? 23. Is adequate insurance coverage provided? Apply Only to Perpetual Inventory Systems 24. Are surprise physical inventory counts made by persons not responsible for the inventory? 25. Are perpetual inventory records: a. Maintained? b. Verified by physical count at least once every twelve months? c. Reconciled to control ledgers? 26. Are stock records updated daily? 27. Are the postings to the stock records made promptly from the following items: a. Pre-numbered, signed receiving reports? b. Issue requisitions? 28. Are additions to stock records referenced to insure easy verification of the records? 29. Are maximum and minimum quantities recorded on the stock records to insure against overor under-stocking? 30. Are inventories taken without prior reference to quantities on perpetual records? 31. Are discrepancies between physical counts and perpetual records investigated and reconciled while counts are in progress? 32. Do adjustments of the perpetual inventory records require approval of responsible officials? 33. Are returnable containers: a. Properly accounted for? b. Properly safeguarded? c. Properly inventoried? d. Returned promptly to eliminate or reduce demurrage charges?

PURCHASES
Objectives: To ascertain that procedures exist to insure that acquisition of goods and services is properly controlled, accounted for, and in compliance with the institution's purchasing regulations. 1. Are all purchases, other than those from petty cash, made on properly approved orders? a. Does the purchasing agent have sole authority to obligate funds for purchases? b. If not, have delegations of authority been specifically approved by the appropriate governing board? c. Are confirming (after the fact) purchase orders properly used and controlled? 2. Is there adequate separation of duties in connection with the following functions? a. Controlling blank purchase orders? b. Placing orders with vendors (including preparation of purchase order)? c. Receiving? d. Approving vouchers for payment? e. Processing approved vouchers? f. Disbursing? 3. Are purchasing policies defined by written procedures? 4. Are the purchasing policies in accordance with applicable statutes, contract specifications, and institutional policies? 5. Do policies provide for the assignment of responsibility for final purchasing decisions at the appropriate level? 6. Are all purchase orders: a. Pre-numbered? b. Accounted for? 7. In regard to leasing, do procedures insure compliance with the following categories: a. Statutory purchasing regulations? b. Institutional rules and regulations? 8. Is a system of competitive bidding used?

9. Is there a designated centralized receiving area for all incoming goods? 10. Are receiving reports: a. Prepared on pre-numbered forms? b. Compared in detail with purchase orders and vouchers (or invoices)? 11. Are there written procedures for appraisal of vendor performance? 12. Is there a policy statement with regard to conflicts of interest, employeevendor relationships? 13. Are blanket orders and long-term contracts under adequate control?

including

NOTES RECEIVABLE
Objectives: To ascertain that controls exist to insure that all secured amounts due the institution are properly identified and recorded. 1. Is there a written policy governing notes receivable? 2. Are all notes, approved, prior to their acceptance, in accordance with written policy? 3. Are individual notes regularly reconciled with the control account balance(s)? 4. Are notes in the custody of persons having no access to accounting records? 5. Are partial payments adequately reflected in the subsidiary records? 6. Is there periodic confirmation of notes receivable balances? 7. Is a contingent liability record maintained for discounted notes receivable? 8. Are past-due notes promptly followed up? 9. Does the proper approval exist for the write-off of uncollectible notes in accordance with written policy? 10. Is proper control exercised subsequent to collection of notes charged off? 11. Is the custodian of the notes receivable denied access to: a. Cash receipt and disbursement records? b. Notes receivable records? c. Initiation of write-offs? 12. Are notes receivable and related collateral kept under proper physical and accounting control? 13. Are renewals and modifications properly approved?