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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 6
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
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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
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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
2. Cash Payments
Payment by cheques, petty cash or electronic funds
1.
transfer
Supporting documents are needed
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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!!!!
4
