Hock Internal Control Violations

utline each internal control violation, which includes identifying each violation and identifying responsible party(-ies), respectively.
- Establishment of Responsibilities - Utilizing separation of duties for cash handling, which can be achieved by assigning different individuals to duties such as making payments, maintaining documentation, preparing deposits, reconciling records, etc. An essential characteristic of internal control is the assignment of responsibility to specific individuals. Control is most effective when only one person is responsible for a given task. In this example Hock had the ability to order the supplies, make payments and reconcile the records. Additionally, she had the authority to sign the checks and stamp them
This forced Hock to comply and make the payments all in an effort to conceal her transgression.
- There was not an adequate system in place to reveal that Hock was hiding the payments in the books. Therefore, she was able to make the outrageous payments without detection because she was in fear of being reported to the police and the district for the unauthorized payments for goods not received.
- There was not proper oversight measure in place and as a result Hock had the authority to sign checks and stamp them with the signatures of two board officials. Then when the cancelled checks came back, there was no one Hock was required to report to, therefore she was able to manipulate the checks in such a manner that she was able to conceal her illegal actions with ease.
Recommend countervailing policies or procedures that address each violation.
- Understanding Internal Controls provides a tool for all employees in the organization to identify and assess operating controls, financial reporting, and compliance processes and affords them the ability to take action in order to strengthen controls where needed. Therefore, proper training needs to be established and delivered on a regular basis so that all employees understand their responsibilities and duties when confronted with a situation similar to that which Hock
Department managers should be required to intermittently review departmental procedures to ensure that the principles of the established internal controls are being followed.
- There needs to be a system of increased supervision. Hock should have never been able to make $2million in payments without someone else catching this activity. There needs to be a system of check in balances in place that is strictly adhered to regardless of which level you are at within the organization.
- Effective internal control helps an organization achieve its operations, financial reporting, and compliance objectives. Effective internal control is a built-in part of the management process. Effective internal control helps an organization achieve its objectives; it does not ensure success. Internal control keeps an organization on course toward its objectives and the achievement of its mission, and minimizes surprises along the way. Internal control promotes effectiveness and efficiency of operations, reduces the risk of asset loss, and helps to ensure compliance with laws and regulations. Internal control also ensures the reliability of financial reporting. Departmental accounting records and documents are examined by employees who have sufficient understanding of the accounting and financial systems to verify that recorded