Question

The following description represents the policies and procedures for agent expense reimbursements at Excel Insurance Company.

Agents submit a completed expense reimbursement form to their branch manager at the end of each week. The branch manager reviews the expense report to determine whether the claimed expenses are reimbursable based on the company’s expense reimbursement policy and reasonableness of amount. The company’s policy manual states that agents are to document any questionable expense item and that the branch manager must approve in advance expenditures exceeding $500.

After the expenses are approved, the branch manager sends the expense report to the home office. There, accounting records the transaction, and cash disbursements prepares the expense reimbursement check. Cash disbursements sends the expense reimbursement checks to the branch manager, who distributes them to the agents.

To receive cash advances for anticipated expenses, agents must complete a Cash Advance Approval form. The branch manager reviews and approves the Cash Advance Approval form and sends a copy to accounting and another to the agent. The agent submits the copy of the Cash Advance Approval form to the branch office cashier to obtain the cash advance.

At the end of each month, internal audit at the home office reconciles the expense reimbursements. It adds the total dollar amounts on the expense reports from each branch, subtracts the sum of the dollar totals on each branch’s Cash Advance Approval form, and compares the net amount to the sum of the expense reimbursement checks issued to agents. Internal audit investigates any differences.

Identify the internal control strengths and weaknesses in Excel’s expense reimbursement process. Look for authorization, recording, safeguarding, and reconciliation strengths and weaknesses.

Answer 1

VARIOUS WEAKNESS AND STRENGTH IN EXCEL REIMBURESMENT PLAN ARE :

WEAKNESS:

• LACK OF SEGREGATION OF DUTIES: manager is the sole person authorised to pay and grant expenses to double person to cross check whether valid transaction approved
• NO QUOTA SET: there is no upper limit for sanction of expenses as much needed is being expend without any restriction this may waste resources.
• NO ACCOUNTING PRINCIPLE FOLLOWED: as in there are no accounting principle followed whether books are maintained on cash basis or accounting basis.
• INADEQUATE DOCUMENTATION: documentation is not appropiate as it is not maintained in every single step as required by standard of auditing 230- AUDIT DOCUMENTATION only questionable claims are recorded.

STRENGHTS:

• branch manager has right to agree oor disagree payment
• internal auditing done at month end to find any discripancies
• agents require to fill cah advance approval form to get anny advance money which further is required to be verified.