United Way Audit Case Essay

684 WordsApr 3, 20133 Pages
1. Fundamental and cost-effective internal controls that could be established in these charitable organizations would be: a. Segregation of Duties There should be a separation of duties for the functions of receiving, disbursement and recording. Receiving, depositing funds and signing checks should be done by different individuals; as well, requests and authorization responsibility cannot be held by the same person. It is a cost-efficient (almost free) method to guard against the types of fraud perpetrated by charitable organizations such as United Way. b. Proper Documentation All transactions should be recorded and documented fully along with all supplemental documents. Any changes to business structure or processes should also be documented and explained. c. Policy Enforcement (Culture) Organizational culture is extremely important to a non-for-profit since they do not have written business policies. A culture with strong ethical standards and code of conduct stemming from top management is key to preventing fraud; it is also cost-efficient to implement as a control. d. Audit Committee While not as cost-efficient as the other controls listed, there should be an audit committee appointed by the Board. It would be in charge of all financial oversight within the organization. For smaller organizations, they can attempt to recruit professional accountants to volunteer their time for the organization; in exchange, these accountants would be increasing their own reputation as well. Larger organizations might consider appointing an audit firm to audit their statements. 2. CPA firms do not have a responsibility to perform the audits at a lower price than normal. However, in charitable organizations, the work that needs to be done by the auditors is not as comprehensive as public companies. The Board in these organizations have already assigned an audit

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