Indicate the weaknesses in internal accounting control in the handling of collections

What are the four internal control measures for cash?

The Petty Cash Count form can be used to facilitate and document the surprise counts. Although businesses vary their specific procedures for controlling cash receipts, they usually observe the following principles: Prepare a record of all cash receipts as soon as cash is received. Each works to verify the integrity of cash transactions. When duties cannot be sufficiently segregated due to the small size of a unit, it is important that mitigating controls, such as a detailed supervisory review of the activities, be put in place to reduce risks. Allow only the established custodian to access the funds. Paper copies of financial documents, blank checks and disks containing computer back-up data not stored in a limited access, secure, fireproof location are evidence of weak internal security controls. Use documented policies and procedures to clearly delineate the control activities performed throughout the unit's various business processes. The chief executive and financial officers must certify that: They have examined the report, believe that the report does not contain any untrue statements or have omitted material facts, and the financial statements and other financial information are fairly presented. Did you know? Ideally, all four stages would be performed by different individuals. Reconciliations between book and bank balances must be performed on a monthly basis and documentation that the reconciliation was performed, that reconciling items were investigated and resolved must be retained. There are many aspects that impact planning within an organization such as it gives organization direction; decreases uncertainty; ensures progress toward a goal; allows organization to take corrective actions if progress is not in alignment with the goal; failing to plan is planning to fail. For areas with regular cash receipts, a drop safe is recommended to limit access to the contents of the safe. Make certain that enough cash is available to pay bills as they come due.

Computer accounting program permissions should grant access to users based on the duties the user is required to perform. When duties cannot be sufficiently segregated due to the small size of a unit, it is important that mitigating controls, such as a detailed supervisory review of the activities, be put in place to reduce risks.

An adequate business purpose should describe the reason why the transaction occurred as opposed to only restating the item purchased.

internal controls for cash receipts and cash disbursements

Reconciliations between book and bank balances must be performed on a monthly basis and documentation that the reconciliation was performed, that reconciling items were investigated and resolved must be retained. Evaluate Cash Handling Policies and Procedures Evaluate Daily Operating Procedures Evaluate daily operating procedures to see whether the business has clearly defined procedures that, for example, distinctly separate cash handling duties.

internal controls for cash handling

Typically a manager will delegate to a subordinate a certain authority for a specific transaction e. Look to see whether documents such as receipts, blanks checks and purchase orders are pre-numbered and in the proper order.

Identify internal control weaknesses

While any weakness in any internal control is significant and should be rectified, internal control weaknesses in cash receipts are especially serious. At least annually, the DOA framework needs to be reviewed for appropriateness to ensure University objectives are being achieved while limiting risk to an acceptable level. In these circumstances, the department may rely on compensating controls to mitigate the risk that cash is misappropriated e. Locate the safe where it is continually visible by departmental employees but out of public sight. This record will be compared to the actual cash on hand during the daily balancing of the register or cash box. If supporting documentation is not provided, request the cardholder to provide it or obtain a copy from the vendor. Require two signatures on each check over a material amount so that one person cannot withdraw funds from the bank account. The following principles of good cash handling will be discussed in greater detail: Segregation of duties, Security, Reconciliation, Management Review, Documentation.

Use documented policies and procedures to clearly delineate the control activities performed throughout the unit's various business processes.

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Cash and Internal Control