Standards of Internal Controls - Arizona State University

5.0 FINANCIAL REPORTING CYCLE
The Financial Reporting Cycle encompasses the functions involved in ensuring that Generally Accepted
Accounting Principles (GAAP) are followed by the university; preparing journal entries and posting to the
general ledger; gathering and consolidating the information required for the preparation of financial
statements and other external financial reports; and preparing and reviewing the financial statements and
other external reports. The Financial Services department is charged with the responsibility of preparing
and issuing the annual financial statement; all departments are responsible for ensuring their fiscal
information is accurate and processed/submitted timely.
In management's selection of procedures and techniques of control, the degree of control implemented is a
matter of reasonable business judgment. The common guideline that should be used in determining the
degree of internal controls implementation is that the cost of a control should not exceed the benefit
derived.
The internal control guidelines for the Financial Reporting Cycle have been divided into three parts:
5.1 Accumulation of Financial Information
5.2 Processing and Reporting of Financial Information
5.3 Related Party Accounts
5.1 ACCUMULATION OF FINANCIAL INFORMATION
Standard of Internal Control Risk if Standard is Not Achieved
5.1.1 Accounting policies and procedures
should be in accordance with GAAP
and university policy.
Refer to risks: A-1, A-2, A-3, A-4
5.1.2 New accounting policies or changes
to existing policies should be properly
researched, reviewed and
documented. Financial Services/
ABOR should authorize all changes
in accounting policies.
Refer to risks: A-1, A-2, A-3, A-4
5.1.3 All journal entries should be
documented, reviewed and approved
by appropriate level of personnel.
Refer to risks: A-1, A-2, A-4, A-5
5.1.4 Standardized journal entries should be
utilized whenever possible. A
process should be in place to identify
standardized journal entries which
were omitted or duplicated.
Refer to risk: A-5
A-1 The financial statements issued to the
public may not be prepared in
accordance with GAAP.
A-2 Reports may not be accurate and
critical decisions may be based upon
erroneous information.
A-3 Policies and procedures may not be
properly or consistently applied by or
between departments.
A-4 Governmental reporting requirements
and/or loan restrictions may be
violated.