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Chapter 6

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Chapter 6

s

Uploaded by

Phan Thi Van Anh
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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CASH

$$$$$$$$$$$$$

Chapter 6
Objective
Describe the nature of cash and the importance of 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
Contents

Importance of
Internal Control cash and cash
controls

Internal Control for


Bank Account
Cash
Internal Control
• Policies, procedures within organisation (effected
by BOD and BOM) to give reasonable assurance
of achieving objectives:
• Asset protection
• Effectiveness of operation
• Compliance with laws and regulations
Internal Control

CONTROL RISK INFORMATION CONTROL MONITORING


ENVIRONMENT. ASSESSMENT AND ACTIVITIES
COMMUNICATION
CONTROL
ENVIRONMENT

• It is the responsibility of top management to


make it clear that the organization values
integrity and that unethical activity will not be
tolerated
RISK
ASSESSMENT
• Companies must identify and analyze the
various factors that create risk for the business
and must determine how to manage these
risks.
CONTROL ACTIVITIES

To reduce the occurrence of fraud, management must design


policies and procedures to address the specific risks faced by
the company.

Control activities:
Supervision or
Segregation of Authorisation of Retention of Physical
monitoring of
duties transactions records safeguards
operations
Segregation of duties

• Separating authorisation, custody, and record


keeping 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
Authorization of
transactions

• Review of particular transactions


by an appropriate person.

• Normally by supervisor.
Retention of records
• Maintaining documentation to substantiate transactions.
Supervision or monitoring of operations
• Observation or review of ongoing operational activity.
Physical safeguards
• Usage of cameras, locks, physical barriers, etc. to protect property, such
as merchandise inventory.
Internal Control for Cash

Purchase
Sale (FG, raw
material)

Cash
Debt
Bank
Collecting
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
• High risk of loss → safeguard needed
Cash Receipt Controls
Cash Receipt Controls
Cash Controls

OVER-THE-
COUNTER
RECEIPTS
Important internal
control principle—
segregation of record-
keeping from physical
custody.
Cash Disbursement
Cash Disbursement Controls
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!!!!
THANK YOU

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