Today’s reports that Prince George’s county council plans to conduct an audit concerning instruction, support services, human resources, business management and information technology does not go far enough and it might end up misleading.
Prince George’s County Public Schools needs a deep financial audit in addition to the aforementioned areas to verify the truth. County citizenry needs to demand a proper financial audit going back many years IN ORDER to understand what has been going on within the County. A fox cannot guard a chicken house on its own.
Below is a brief description on how Financial audits are conducted and what the county residents needs to do to get answers. There should be no “buts” and “ifs.”
Financial audits dig deep into a company’s financial situation, probing accounting records, internal controls policies, cash holdings and other sensitive financial areas. Publicly-traded corporations are subject to external financial audits on a regular basis, and even privately owned small businesses can be subjected to an external financial audit by the IRS or other government authority. Knowing how to perform a financial audit can help one to prepare for a possible external audit, keeping accounting system in order and discourage internal fraud and theft.
Review the systems put in place to transmit financial information to the accounting department. The first step in the accounting cycle is to gather financial documentation, such as sales receipts, invoices and bank statements, and forward it to the accounting department for processing. Without timely and reliable information, accounting records can become unreliable themselves, creating discrepancies in a COMPANY’s financial records.
Look into the COMPANY’s record-keeping policies and check to ensure records are being stored properly. Small businesses should keep at least an electronic photocopy of cash register tapes, cancelled checks, invoices and other financial documentation until the end of the current accounting period. Make sure that archived records can be accessed quickly to shed light on any potential issues that arise.
Identify and review each element of the COMPANY’s accounting system, including individual T-accounts (debits and credits), journal entries, the general ledger and current financial statements. Systematically work through the accounting system to ensure that all necessary accounts are present, that T-accounts are posted to the general ledger in a timely manner and that the system has the ability to correct human errors, such as arithmetic mistakes.
Check into the COMPANY’s internal controls policies to gauge the level of protection they provide from theft and fraud. Internal control policies include things like separation of accounting duties between different employees, locked safes for holding pending bank deposits and password-protected accounting software that tracks exactly who does what and when.
Compare internal records of cash holdings, income and expenses against external records. Check the COMPANY’s stored external records and compare selected transactions against internal records. Compare purchase receipts sent from suppliers for a certain month against internal purchase records, for example, or compare cash register tapes against revenue recorded on the books.
Analyze the COMPANY’s internal tax records and official tax returns. Tax records should be kept for seven years to be on the safe side. Browse through the COMPANY’s tax receipts from the IRS and compare it against records of tax liabilities and taxes paid in the COMPANY’s accounting records. Take a little extra time to review the range of credits and deductions claimed on the most recent tax return, looking for areas of dubious reporting, such as inflated expense numbers.