AG says irregular expenditure in municipalities highlights the lack of basic accounting controls - use these tips to ensure your controls are effective
Last week, the Auditor General, Kimi Makwetu released his local government audit outcomes findings. He said, of the more than 300 audits, 9% of South Africa's municipalities got a clean audit. Nearly half received unqualified audits, reports Eye Witness News.
Makwetu found irregular expenditure was reported in 83% of audits, highlighting the lack of basic accounting controls.
This report has put sharp focus on the importance of having proper accounting controls. To avoid falling into the same trap as these municipalities, use these tips to ensure you have effective controls so your business can stay cash healthy.
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What are internal controls?
According to cliffsnotes.com, internal control is the process designed to ensure reliable financial reporting, effective and efficient operations and compliance with applicable laws and regulations. Safeguarding assets against theft and unauthorised use, acquisition, or disposal is also part of internal control.
Here are two tips you can use to ensure your internal accounting controls are effective
#1: Have adequate documents and records
This'll help ensure your financial statements are accurate.
Controls designed to ensure adequate recordkeeping include the creation of invoices and the timely preparation of documents, says cliffsnotes.com.
#2: Segregate duties
This requires assigning responsibilities to different people. This helps to limit fraud and ensures there isn't any fruitless expenditure.
For example, the same person who is responsible for an asset's recordkeeping should not be responsible for physical control of that asset. Having different individuals perform these functions creates a system of checks and balances.
Overall, the best way to identify and establish effective controls is to continually assess the risk, monitor control implementation and modify controls as needed.
For more tips on effective accounting controls, check out the Practical Accountancy Loose Leaf Service so you can ensure your company remains cash healthy.
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