You are to write a portion of an audit report based on the facts in this case. Your report will include the executive summary, findings, and recommendations. . For each finding indicate the probable underlying cause and possible financial impact to the housing operation

TESTS OF INTERNAL CONTROLS S

Several tests were conducted to determine whether key controls identified during the internal control evaluation were in effect. The following is a list summarizing the results of the tests performed:

1. A sample of residents was selected. For each resident the auditor: (a) examined the contract noting if the correct room rate was charged; (b) traced payments per the contract to housing's ledger card, cashier records, bank statement and general ledger, noting that payment was properly recorded and deposited; (c) for those contracts not yet paid in full, the auditor traced outstanding balances to accounts receivable. No exceptions were noted.

2. A sample of credit adjustments was reviewed for authenticity, support and proper approval. Adjustments were properly supported and occurred as a result of valid reasons. All were prepared by the Fiscal Assistant without any evidence of review by the Housing Director.

3. Accounts receivable confirmations were sent to all accounts with past due balances over $850. This sample represents 58% of Housing's receivable balance. Second and third requests were sent to those who did not respond to the first letter. The auditor tried to obtain new addresses for those letters returned by the post office. Final results included 8% confirmed correct, 12% confirmed with a difference, 52% no reply, and 28% returned by the post office. The auditor noted that several home addresses in the Housing files were either incomplete or showed the housing address as the home address. This makes collection of accounts receivable very difficult after the student leaves the university and the situation increases credit risk. The auditor investigated the responses with a difference and found that in most cases, the receivable balance per Controller was different from the balance per Housings ledger card. Controller balance tended to be overstated mainly due to errors originated by Housing. The auditor decided to expand the sample and conducted the test described below.

4. Accounts receivable balance per Housing's ledger card was compared to Controller's accounts receivable balance for a sample of 26 residents. Seven instances were noted where the receivable balance per Controller system was higher than the balance per Housings ledger card. The auditor investigated the differences and found that in all cases the balance per Housing was correct. Reasons for differences included: Student payment was credited to revenues instead of receivables because Cashier received payment before the receivable was recorded in the system. The billing was recorded later, creating a receivable for a bill that was already paid. Housing sent incorrect adjustments to the receivable system. These adjustments, however, were properly reflected in Housing's ledger card. The Fiscal Assistant did not send some adjustments made by Housing to the ledger cards to the accounts receivable system due to an oversight.

5. A review of the accounts receivable aging at the end of the fiscal year (6/30/X1) disclosed the following past due receivable balances: Total A/R 6/30/X1 $202,840 Summer 19X1 $30,835 Spring 19X1 $24,430 Fall 19X0 $11,697 Summer 19X0 $4,319 Spring 19X0 $23,551 Prior to 1/1/X0 $108,008 The auditor noted that the billing for the Spring term 19X0 was recorded in the controller's receivable system two weeks before the end of the semester. According to explanations given to the auditor, the Fiscal Assistant was too busy and was not able to prepare the billings on time. As a result, many residents were able to complete the term without paying the second half of the fee.

6. Account receivable written off during the fiscal year totaled $38,724. The auditor examined supporting documentation ascertaining that all write-offs were properly approved in accordance with university policy. No exceptions were noted.