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Internal Audit and Budget Department- Cash Receipts

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Audit Program
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    Internal Audit and Budget Department AUDIT PROGRAM   Audit Area: Cash Receipts Received cash, checks, remittance lists and remittance advice I. Risk F-1: Cash receipts may be lost and/or misappropriated.   II. Control/Control Procedure    Separate the cash receipt function from the related record keeping function.   III. Audit Objective To determine whether controls over checks arriving in the mail are adequate. IV. Audit Procedure 1. Verify that all bank account openings and closings have been approved by the treasurer of the organization. 2. Ensure that incoming cash is handled by the least possible number of employees while maintaining segregation of duties. Check that cash receipts are promptly deposited intact and not commingled with other cash items or petty cash funds.    Internal Audit and Budget Department AUDIT PROGRAM   Audit Area: Cash Receipts Store checks and cash in a lock box or safe I. Risk F-3: Inadequate physical access controls over cash.   II. Control/Control Procedure    Restricted areas, money safes, controls over night collections (PC).   III. Audit Objective To determine whether access to cash receipts is permitted only in accordance with management’s authorization.   IV. Audit Procedure 1. Determine that employees handling cash funds are properly bonded. Based on the volume of cash receipts, analyze the need for the use of a lockbox. Ensure that when branch offices collect cash receipts, only the head/ home office  –  authorized personnel deposit those collections in a bank account subject to withdrawal. 2. Select a representative sample of checks returned by the bank as uncollectible.  Ascertain that an individual not responsible for preparing the cash deposit has investigated and taken appropriate action. 3. Only the cash handling clerk and one backup employee should have a key to the lockbox or the combination to the safe. If either of these employees leaves the company or is reassigned to another position, the company must change the lock or safe combination.    Internal Audit and Budget Department AUDIT PROGRAM   Audit Area: Cash Receipts Deposit cash or check in the bank I. Risk F-2: Lost, incorrectly recorded, and/or misappropriated cash receipts may not be identified and corrected timely II. Control/Control Procedure   Prepare a verified deposit slip or the list of checks for verification of the accuracy or completeness of cash receipts. III. Audit Objective To ensure that the cash/check are properly deposited in the bank. IV. Audit Procedure 1. The cash receipt officer must stamp “for deposit only” and the company’s bank account number on every check received; this makes it more difficult for someone to extract a check and deposit it into some other bank account. 2. The cash processing clerk records all checks and cash on a deposit slip. They must compare the total on the deposit slip to the amount stated on the mailroom check receipts list, and reconcile any differences.      Internal Audit and Budget Department AUDIT PROGRAM   Audit Area: Cash Receipts Bank Reconciliation I. Risk F-7: Potential for fraud or irregularities   II. Control/Control Procedure    Segregation of duties between cash receipts and bank reconciliation: vouching for payment; credit; opening incoming mail; and posting cash receipts to the general ledger functions.   III. Audit Objective To ensure that there is unintentional use of cash funds for personal expenses .   IV. Audit Procedure 1. Ensure that cash receipts are prelisted at the initial point of receipt by preprinted cash receipt forms. Verify that cash receipts are posted to detail accounts receivable records from collection advice, not the checks. Find out if an independent person promptly compares the totals with entries in the cash receipt records. Requiring preparation of a prelist of incoming cash receipts, with copies of the prelist going to the cashier and to the accounting department, is an example of a preventive control. 2. Trace the amount received to the daily bank deposit. Note any differences. 3. Ensure that no payroll or personal checks are cashed from cash receipts. 4. Examine the account distribution of the cash receipt total and compare to the detail receivables posting and the invoice as to amount and date entered. Ensure discount and allowances taken are proper. Ensure that cash receipts regarding taxes are accurately classified and reported to the tax authorities in a timely manner. In order to determine whether customers took served cash discounts, compare cash receipt  journal entries with related remittance advices and sales invoices. 5. Obtain bank statements and verify that deposits are being made on a daily basis. Investigate any unusual amounts.
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