12-Jul-19 Importance of cash and cash controls Cash: coins, paper money, cheques, and fixed deposits with banks Cash is needed for everyday operation of any business Chapter High risk of loss safeguard needed Objective Internal Control Describe the nature of cash and the importance of Policies, procedures within organisation (effected by internal control over cash Summarise basic procedures for achieving internal control over cash receipts Summarise basic procedures for achieving internal control over cash payments Describe the nature of a bank account and its use in controlling cash BOD and BOM) to give reasonable assurance of achieving objectives: Asset protection Effectiveness of operation Compliance with laws and regulations Contents Internal Control Importance of cash and cash controls Control Environment Internal Control Risk Assessment Internal Control for Cash Information and Communication Bank Account Control Activities Monitoring 12-Jul-19 Internal Control Authorization of transactions Review of particular transactions by an appropriate person Risk Assessment Monitoring Control Environment Control Activities Information and Communication Internal control Control activities: Normally by supervisor Retention of records Maintaining documentation to substantiate transactions Segregation of duties Authorisation of transactions Retention of records Supervision or monitoring of operations Physical safeguards Segregation of duties Separating authorisation, custody, and record keeping Supervision or monitoring of operations Observation or review of ongoing operational activity roles to prevent fraud or error by one person No one person should (altogether): Initiate transaction Approve transaction Record transaction Reconcile balances Handle assets Review reports 12-Jul-19 Physical safeguards Internal Control for Cash Receipts Usage of cameras, locks, physical barriers, etc to protect property, such as merchandise inventory Received from Cash Sales Cash Register Internal Control for Cash Internal Control for Cash Receipts Received in the Mail Purchase (FG, raw material) Sale Cash Debt Collecting Bank Internal Control for Cash Internal Control for Cash Payment Cash Receipts Cash Payments Payment by cheques, petty cash or electronic funds transfer Supporting documents are needed 12-Jul-19 Bank Account Business may have several bank accounts Check Check Payee Bank (Drawee) Drawer Money Bank Account Bank statement Bank Account Bank account could be used as a Control Over Cash as it provides a second record of cash transactions Payment should not be made out by cash!!!!