As an added value, the auditor should prepare an internal control memorandum or a letter of recommendations, based on the results of the internal control evaluation, where inconvenient situations, deficiencies, errors, inconsistencies and possible control exceptions are detected. internal, which must be reported and analyzed in draft initially, to achieve full security of detection and thus not indicate aspects that can be easily refuted, losing professional weight the auditor and therefore credibility.
There is no distinction on the part of the auditors in the use of the terms in audit between inconsistency, exception of internal control and deficiency. For this purpose, the definitions of said terms are exposed:
- Inconsistency: Mathematical errors, erroneous accounting classifications, coding errors, registration errors, inadequate or lack of accounting supports, etc., that affect historical, restated financial statements, statistical, economic and tax information represent “inconsistencies”.
- Exceptions to Internal Control: There are general and specific internal control principles, as well as pre-established internal procedures and legal provisions, framed within the so-called “compliance” requirements, which must be complied with. When there are deviations or violations of them, it can be considered as "internal control exceptions".
- Internal Control Deficiencies: Any failure found, indelicate situation, administrative aspect, inconvenience or other situation that affects the safeguarding of assets, which does not fit within the definitions of inconsistencies or exceptions, is considered “internal control deficiency”.
If irregularities are found, which could turn into fraud, they should not be included in a global memorandum, but in a special report, where the depth given to the investigation is explained, including internally and externally reviewed documents, based on the audit techniques required, trying to ensure the conclusions reached and determine the possible responsibilities of the executors of the operation.
Based on the personal experience and that of many auditors and authors, a compilation of inconsistencies, exceptions and deficiencies of internal control was made, which were grouped by transactional cycles and those of general and administrative aspects.
Deficiencies, inconsistencies and exceptions of internal control classified by transactional cycles for commercial, manufacturing and non-profit entities.
Financial Cycle
1. Inadequate records
2. Past due accounting
3. Insufficient information
4. Lack of printed forms for reports
5. Outdated account catalog
6. Lack of periodic reconciliations
7. There are no formal authorizations for operations
8. Inadequate communication with branches
9. There are no charts of the accounting system
10. Inadequate accounting file
11. There are no automated systems
12. Extemporaneity of records in ME
13. Fiscal profit in memorandum accounts
14. Without fiscal depreciation control
15. Lack of financial analysis
16. Financial statements without adjustment for inflation
17. There are no seniority premium reserves
18. Bank overdrafts without applying
19. No reclassification of accounts
20. Incorrect accounting records
21. Increase of NO tax deductible
22. VAT on property sales NOT accounted for
23. Auxiliary Inconsistencies VS Major
24. Account statements by customer, supplier and / or subsidiaries
Operating costs
1. Breach of tax requirements on purchases and expenses
2. No budget control
3. Reasonableness of expenses
4. Extemporaneity of declaration of wages and salaries
5. Accounting tax reconciliations
6. Registration of unsuitable assistants
7. Classification of payroll concepts
8. Lack of timely information
Advance payments
1. Non-application of tax regulations
2. Inaccuracy of tax returns
3. Inadequate accounting for seniority premiums
4. There are NO issued shares titles
5. Minutes books show arrears
Fixed Assets
1. Leasing without registration
2. Loss of equipment without registration
3. Official appraisals
4. No fixed asset appraisal
5. Inflation component errors
6. Advance interest without control
7. Undisclosed warranties
8. Calendar of tax obligations
9. Incorrect statements
10. Distribution of profits to directors and administrators
11. Cancellation of profits for the year
12. Inadequate accounting for seniority premiums
13. without debug taxes payable
14. Classification of obligations
15. There is NO accounting of legal reserve
16. Without accounting the patrimony.
17. No accounting of tax profit account
18. Minutes book outside the home
19. Minutes of Assembly without signature
20. NO profit record
Additional Aspects
1. There is NO departmental coordination
2. Without delimitation of functions and responsibilities
3. Unused and / or updated manuals
4. Internal audit weaknesses
5. Misplaced Internal Audit
6. Inadequate asset security measures
7. There is NO internal work regulation
8. There is NO organization manual
9. Inadequate control of insurance policies
10. Lack of communication between areas or departments
11. NO segregation of duties
12. Inadequate credit policies
13. Inadequate collection control
14. Lack of application of procedures
15. NO application of accounting standards
16. Employee savings funds
17. Breach of tax regulations
18. There is NO control of personnel entry and exit
Purchase and Supply Cycle
1. Registration of personnel signatures
2. Proof of payment without signature of receipt
3. Registration of joint signatures
4. Bank reconciliations without evidence of revision
5. Unbalanced bank reconciliations
6. Unsecured fixed funds
7. Improper use of parent box
8. Firms NOT canceled in banks
9. Bank accounts in the name of third parties
10. Cash payments
11. Checks issued to different beneficiaries
12. Unprotected checks
13. Checks NOT voided
14. NON-pooled check signatures
15. Unauthorized bank reconciliations
16. Balances in ME without updating
17. No shopping budget
18. Capitalized repair
19. Inappropriate file of goods invoices
20. Inadequate equipment coverage
21. Doc support No paid date stamp
22. CXP and CXC seniority greater than one year
23. No vendor balance reconciliations
24. Unreported liabilities
25. Inappropriate classification of liabilities
26. Proof of expenses without authorization
27. Disorder in the classification and recording of expenses
28. Expenses from previous years
29. Vouchers paid without date stamp paid
30. Breach of tax requirements on expenses
Payroll Cycle
1. Accounts of employees and officials NOT cleared
2. Lack of control of personnel assistance
3. Without authorization of payroll payment
4. Inadequate segregation of duties
5. Implementation of adequate payroll software
6. Incomplete personnel records
7. Miscalculated tax withholdings
Treasury Cycle
1. Inadequate coverage of cashiers
2. Extemporaneity of interest earned
3. There is NO control of obligations held by lawyers
4. Interest capitalized in error
5. Control of goods and equipment
6. Figures not adjusted and / or updated
passive
1. Without reconciling financial obligations
2. Inappropriate Presentation of Capital
3. There are NO balance confirmations
4. There is NO control of boxes in branches
5. Idle goods without punishment
6. cash funds with control failures
Production Cycle
1. Credit notes NOT prepared by return of mcia.
2. Obsolete inventories
3. Physical inventory instructions NOT applied
4. Warehouse movements without control
5. Kardex from overdue warehouse
6. Inventory differences unclear
7. Control of the transfer of articles in process
8. Neglect of inventory
9. Inadequate planning of inventories
10. Inadequate cost system
11. Obsolete or slow moving items
12. Excess tax depreciation
13. Depreciable assets without control
14. Bad depreciation calculations
15. Improvements in fixed assets
Income Cycle
1. Documentation Not properly protected
2. Lack of sureties for personnel who manage values
3. Referrals without signature received
4. Invoices without consecutive folio control
5. Sales made at prices below cost
6. Periodic and surprise bows
7. Evidence and support of discounted documents
8. Estimation of bad debts
9. Cancellation of bad accounts
10. Classification and control of accounts receivable
11. Inadequate receipt of unused invoices
12. Accounting record of sales by type and / or line
