Blake University

Blake University in British Columbia is a mid-size university with seven faculties. The university fiscal

year for financial reporting spans from May 1 to April 30 of the following year. Because the university

funding usually consists of donations with specific spending requirements, fund accounting is used to track

expenses.

Upon receipt of money, a corresponding fund with a unique number is set up in the accounting system.

Any spending recorded in the fund is reviewed by the financial office to ensure compliance with

stipulations of the donor.

In addition to expenses recorded in the accounting system, adjusting journal entries can also be made.

These transactions are coded with the prefix "J" and are used to correct errors in posting or to transfer

expenses from one fund to another. These adjusting entries should be made prior to year-end financial

reporting.

Unlike other types of transactions such as invoice payments, journal entries have no formal process of

scrutiny and are subject only to the discretionary review of the accounting department. As a result, policy

stipulates that only faculty financial officers can initiate journal transactions for their own faculties.

As part of the audit plan for the current fiscal year, the internal audit department of Blake University has

been mandated to examine the journal entry process. The following tables list information on journal

entries posted in the month of May 2016.

EMPLOYEE

EMP_ID

EMP_NAME

POSITION

FACULTY

101

Ali Awad

Administrator

Science

102

Brian Bean

Administrator

Arts

103

Cathy Chan

Administrator

Management

104

Hugh Holme

Financial officer

Science

105

Kim Kan

Financial officer

Arts

106

Steve Short

Financial officer

Management

107

Tim Tom

Dean

Management

EMP_ID: A unique number for each employee

EMP_NAME: Name of the employee

POSITION: Job position of the employee

FACULTY: Faculty of the employee

TRANSACTION

TR_ID

CODE

DR

TR_DATE

TR_AMT

REF_CODE

ACCT

FUND

ENTER_BY

1001

J100

1

5/2/2016

$499.25

I230

7003

160

101

1002

J100

0

5/2/2016

$499.25

I230

7003

100

101

1125

J101

1

5/12/2016

$4,125.12

I512

7002

100

102

1126

J101

0

5/12/2016

$4,125.12

I512

7002

120

102

1355

J102

1

5/20/2016

$1,155.21

I264

7005

200

101

1356

J102

0

5/20/2016

$1,155.21

I264

7005

120

101

1380

J103

1

5/22/2016

$5,423.11

I345

7001

140

103

1381

J103

0

5/22/2016

$5,423.11

I345

7010

140

103

1450

J104

1

5/23/2016

$2,762.23

I466

7002

140

103

1451

J104

0

5/23/2016

$2,762.23

I466

7010

140

103

1520

J105

1

5/19/2016

$12,500.13

I259

7003

140

103

1521

J105

0

5/19/2016

$12,500.13

I259

7010

140

103

0905

I230

1

3/25/2016

$499.25

7003

100

101

0906

I230

0

3/25/2016

$499.25

1000

100

101

TR_ID: A unique number for each transaction

CODE: A unique code for each transaction document (Prefix: J - journal entry; I - invoice payment)

DR: Indicator of whether the account in the transaction is debited or credited (1 - debit, 0 - credit)

TR_DATE: Transaction date

TR_AMT: Transaction amount

REF_CODE The CODE related to the transaction

ACCT: The ACCT_ID of the account involved in the transaction

FUND: The FUND_ID of the fund involved in the transaction

ENTER_BY: The EMP_ID of the employee who entered the transaction into the system

FUND

FUND_ID

FUND_TITLE

100

Faculty of Science teaching fund

120

Faculty of Arts teaching fund

140

Faculty of Management teaching fund

160

Faculty of Science IT equipment fund

200

Faculty of Arts building construction fund

225

Faculty of Science research fund

250

Faculty of Management student awards

275

Faculty of Science student awards

FUND_ID: A unique number for each fund

FUND_TITLE: The title of the fund describing its purpose

ACCOUNT

ACCT_ID

ACCT_TITLE

1000

University operation bank account

7001

Expense materials and supplies

7002

Expense Office furniture

7003

Expense Computer equipment

7005

Expense Traveling

7010

Expense Miscellaneous

ACCT_ID: A unique number for each account (IDs of expense accounts begin with the number 7)

ACCT_TITLE: The title of the account describing its purpose

Required

a. Using the information provided, state five observations and five related conclusions you would reach as a result of these procedures. (10 marks)

b. Define programmed controls and describe at least two controls that can be implemented to improve

the journal entry process based on the observations from part (a). (6 marks)