Internal controls and petty cash Flashcards
What are the objectives of internal control?
safeguard assets of the business
accuracy and reliability of accounting data
promote operational efficiency
encourage adherence to prescribed managerial policies
How are assets safeguarded?
protected of assets from loss
maintances of resources, equipment ensure efficient utilisation
how can there be operational efficiency
providing products and services at minimum cost
training programs and proper supervision
use mechanical and electric equipment
What are the 2 types of internal controls
accounting
administrative
What are the principles for internal controls
reliable, competent personnel
responsibility
separation of duties/rotation of duties
authorisation
verification
adequate and accurate documents and records
physical controls and security
What is verification
checking accuracy of records by independent means
What is authorisation
validation by person of authority for action
Organisation must fix responsibility for
functions to be performenced
What are the duties that are separated
custodianship
recording
authroisation
______ is required to commit a fraud if there are 2 or more people
collaborate
How are records designed?
simple
Documents must be arranged
sequentially numbered
Recording that takes place must be
simultaneous
All cash received must be banked ____ at the end of business day
intact
What does banking intact mean
separate from other cash
payment of money must be evidenced by
document or prooft
All large payments should be made by
cheque
GIRO
Cash should be kept in a
safe place
at regular intervals, business records must be checked against
bank statement
Who should do bank reconciliation
a separate person
Why sepprate employees duties?
minimise errors, opportunities for fraud
Employees who handle cash must not have access to
accounting records
why rotate employees duties
familiarity leads to lack of vigilance
pre-numbered receipts should be given to customers with
duplicate retained
How many people should open the mail
2
what is used to bring to light any cash shortages or recording errors
control listing
what responsibilities should be separated in cheques?
signing and authorising
approving cash disbursement
When cheque is signed, what should be stamped on supporting docs
paid
who can have access to blank cheques?
authorised signers
signed cheques should be immediately
mailed
What is the starting entry called in setting up fund
petty cash advance
What is the final entry called
reimbursement
