Controls for Outflows
Learning Team A
ACC/544
June 29, 2015
La Ron Roach

Controls for Outflows Misstated expenses and costs have been listed as common reasons for financial statement restatements according to a report issued by the Government Accountability Office (Louwers et al, 2007). The improper recording of costs and expenses are due to errors as well as fraud. To prevent errors and fraud, proper controls for outflows should be performed. This proposal seeks to provide recommendations and explanations of controls in the areas of purchasing, accounts payable, cash disbursements, finance, investment, and payroll.
Purchasing
Purchases are made based on an organization’s needs and are therefore a key component in business. The following internal control practices can help to alleviate risk and reduce fraud: • Segregation of duties • Accountability through authorizations and approvals • Security of assets • Review and reconciliation Segregations of duties can be implemented by assigning related purchasing functions to different people. This ensures that no person has complete control over all buying functions. The safest practice is to have different employees to approve purchases and receive goods that have been ordered. Also, different people should approve invoice payments, conduct inventory counts, and perform a financial records review. Without this separation, the potential for theft and fraud increases. The business can maintain accountability by authorizing and approving purchases based on purchase orders and signed contract agreements. This is done by 1.) ensuring that employees comply with ethical purchasing practices and policies, 2.) periodically updating and reviewing authorized signatures, 3.) matching the goods and services received to purchase order/contract and the