Chapter 21, Problem 47P

Devry Corporation has established an independent foundation for the purposes of community improvement. The foundation employs an executive director and eight staff people. The internal auditors of the company were requested to do an audit of the foundation in 20X1 to determine problems with the recording of transactions, the handling of cash, and documentation of transactions. The following items were found:

1. 1. The foundation used the cash basis of reporting rather than the accrual basis.
2. 2. The foundation lacked a copy of the plane ticket for airfare reimbursed for a trip taken by one of the volunteers.
3. 3. Excess funds were invested in instruments other than those specified by the organization’s policy manual.
4. 4. The purchase of a desktop publishing system was expensed.
5. 5. The foundation does not employ anyone with formal accounting training.
6. 6. Many errors were made in recording transactions, which necessitated many year-end adjusting entries.
7. 7. Numerous certificates of deposit were found in many different locations (e.g., filing cabinets, desk drawers, and a safe deposit box).
8. 8. The checking account was reconciled by the individual who wrote the checks.

Required:

Write an internal audit report (in proper form) to the executive committee of the foundation indicating findings and recommendations. (CIA, adapted)