Management Letter

OBSERVATION:
Accounting Software
It was observed that the accounts department has no sufficient knowledge and training related to
Accounting software (QuickBooks) used by the company.

RECOMMENDATION:
The management of the company should provide proper training to accounts department related
to QuickBooks and should conduct training session at-least once in a year.

OBSERVATION:
Reconciliations:
It was observed that no reconciliations have been made by the client for Receivables, bank and
other current assets of the company since inception. There may be some receipts or payments
which have or have not been recorded in the books of accounts and the entity may suffer material
losses due to this control weakness.
RECOMMENDATION:
It is suggested that proper and timely reconciliations should be made of material customers,
donors and bank reconciliation statements to minimize the risk of loss to the company.

OBSERVATION:
Segregation of Duties:
There is a lack of segregation of duties in the whole system of entity. The risk of fraud and

misappropriation of assets increases as the same person is recording and paying the petty cash to
employees.

RECOMMENDATION:
There should be segregation of duties between collection, recording and payment of petty cash.

OBSERVATION:
Documentation of Fixed Assets
During performing the audit procedures on fixed assets, we observed that the proper working
paper of purchase and sale of fixed assets were not maintained by the management of the
company.

RECOMMENDATION:
It is suggested that proper and timely documentations of all movement of fixed assets should be
maintained by management of the company like sale deed of fixed assets should be filed in the
working papers to minimize the risk of theft.
OBSERVATION:

High Employee Turnover & Human Resource Policies

Due to high rate of employee turnover and inappropriate human resource policies the accounts.
department of the entity lacks knowledge and experience related to accounting. While
performing the audit procedures it was observed that the accountant lacks the knowledge of
accounting entries and their presentation.

Some of the examples are as follows:

Revenue expenditures were recorded as capital expenditures in the books of accounts

Double entry of loan was not recorded in the books of account due to lack of skills,
knowledge and competence.

Depreciation on fixed assets was not recorded due to insufficient knowledge of

accounting standards.

Accounting entries were not recorded promptly in books of accounts.

RECOMMENDATION:
It is suggested that the management of the company should use appropriate human resource
policies, which emphasize strong control environment and should assign authority and
responsibility appropriately