I have been doing the bookkeeping for a charity for 10 years and have been a member of staff there for 8 years. Consequently I do the wages, preparing and the bank transfers - including my own. We have a treasurer that looks at the books and they are audited once a year. We have had a new chairman come on board saying they are uncomfortable with the situation. Is there a conflict of interests? Are we breaking rules?
I don't know the legal ins and outs of this but I work in a small business (up to 6 staff) and I run the payroll and make the transfers into the staffs bank accs including my own. I don't see it as a conflict of interest as it is part of the job role, and someone has to do it. Are they making any suggestions as to how they could remedy this so called 'conflict of interest'? Sorry I am of no help, your post has intrigued me. I hope some one on here can set your mind at rest.
the new chairman is right but I'll have money on it that they have gone completely the wrong way about conveying their reasoning (or maybe even understanding the reasoning themselves).
The chairman will be responsible for the controls in place within the organisation. The auditors will test these controls to see what dependancy if any can be placed upon them (per ISA315).
The auditors will have prepared a management letter (per ISA260) which will detail any deficiencies in internal controls (per ISA265).
ISA200 and ISA240 require that the auditor approaches the engagement with an attitude of professional skeptisism and they will be looking for ways that fraud could be carried out even if it is not currently.
There is I am sure absolutely no thought that you might be performing a fraud on the charity but a common weakness has been identified and controls in that area need to be improved. Not for yourself but on the off chance (god forbid) that you were perhaps ill and someone else took over your role for a while who was not as honest as yourself.
The control being questioned here is the segregation of duties.
Guidance dicates that there should be segregation of durties between Authorisation, Custody and Recording.
Clearly in the case of your payroll there is an issue in that the same person records and transfers the salaries. Where are the checks and controls by an independant party?
There is also a very common fraud called ghosting where an uncontrolled person with responsibility for payroll creates an employee whose salary is paid into an account that the bookkeeper is able to access.
Because of the nature of an auditors sampling and analytical procedures its possible for ghosts in the system to go undiscovered for several years (and it is the manager, not the auditor that is responsible for that).
Of course, controls put in place to prevent this do not solve the issue of collusion between fraudsters but works on the assumption that most fraudsters work alone.
All in all, the message that I'm trying to convey is that the issue is not with yourself but with the existing controls for which the chairman has ultimate responsibility.
I'm sure that he thinks very highly of you and your work but such is no excuse to allow sloppy controls to exist within an organisation.
Hope that helps put your mind at rest that your competence is not being questioned here,
kind regards,
Shaun.
p.s. welcome to the forum.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
