Internal cash control is very important to any business. Without effective methods in place to ensure that funds and resources are being used in an ethical and efficient way, a company may lose money or run into many other problems. Through proper establishment of responsibly, segregation of duties, document procedures, and security measures, any company should be able to maintain their funds and feel confident that their employees are producing accurate and ethical results.
In the exercise detailing the cash disbursement within Idaho Company one could find some major weaknesses. The first of these weaknesses with their internal control over cash disbursements would be the checks they use to make payments. These checks are not prenumbered and they are kept in an unlocked bock. To ensure internal control over disbursement of cash a company must have prenumbered checks for record keeping purposes and must always keep their checks in a secure area where only specific people would have access. The next issue that needs to be addressed with Idaho Company is the establishment of responsibility when it comes to paying bills and having access to funds. In this scenario there are two people who have divided the responsibility of paying bills. Only the treasurer should have this responsibility and the person in charge of paying the bills should never be responsible for reconciling the payments. In order to inform Idaho Company of the breakdown in internal cash control within the company, the following memo was created:
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Memo
To: President of Idaho Company
From: Justin D Lowe
CC: Finance Manager
Date: 9/6/2008
Re: Internal Cash Control Suggestions
In order to help resolve Idaho Company’s internal cash control issues, Suggestions Inc. has come up with a few suggestions.
Treasurer
First we believe that Idaho Company should create an official and effective establishment of responsibility. The treasurer should be exclusively responsible for paying bills and ensuring the checks are kept securely contained at all times. The treasurer should not be responsible for reconciling bank or credit card statements as this person is the one who writes the checks. The job of receiving the resources and marking invoices paid will need to be given to an accounts receivable representative of the company.
Purchasing Agents
The purchasing agent should only be responsible or purchasing any resources for the company. This person should be allowed to pay bills, reconcile statements, or receive the resources when they come into the company. The Purchasing Agent does not and should not have access to the checks or check writing privileges.
Middleton Mutual is a large insurance company that is seeking innovation. The Chief Information Officer, Dennis Devereaux, and Vice President of Information Systems, Max Vargo, are trying to push for a new expert system to ease up the underwriting process of their company. The issue that arises in the company is that certain higher ups aren’t willing to fund this one million dollar project without proof of return. Within the next year, the company will be losing two underwriters. Devereaux has his hands full with trying to get the company’s financial approval.
Cash management has several weaknesses regarding segregation of duties. The office secretary should not receive the cash and prepare the cash listing and conduct the daily deposit. These duties should be split up so that the secretary cannot misstate the amount of cash received and be able to falsify cash receipts and daily deposits.
Implementing strategies to create an effective internal control environment is needed to prevent and detect controls of fraud (Murphy, 2015). Control is needed to combat fraud, enforcing employees and volunteers to do the right thing. Management must have control of the organizations operations to tackle risks when they arise (Arshad et al, 2015). According to Arshad et al (2015):
What is internal control? According to University of Phoenix, Axia College Internal Control and Cash (2009), internal control is all of the related methods and measures adopted within an organization to safeguard its assets and enhance the accuracy and reliability of its accounting records. The primary reasons for internal control are help companies protect their investments and merchandise against theft from everyone, including employees and to make sure that the accounting is done correctly and truthfully.
Internal controls are increasingly a crucial part of any business large or small. Controls serve two purposes according to financial accounting chapter eight; they safeguard assets and enhance the accuracy and reliability of accounting records. Expanding on that concept internal controls are put in place as a result of activities that have occurred in the past and are an effort to protect internal and external users. Internal controls safeguard company assets by outlining fair and efficient regulations in an effort to prevent theft. Regulations designed to establish responsibility, segregation of duties, and accountability protect investors, management, and the public. The result of a financial outrage and catastrophes of WorldCom, Enron, Tyco, Hollinger, and Tyco necessitated the need for better regulation and control leading to the creation of the Sarbanes Oxley Act (SOX).
The Consumer and Industrial Products, Inc a company where their headquarters is based in the United States , also doing business internationally with facilities in Europe, Asia and South America. They are a manufacturing company what produced well known products to individuals and industries. This company is experiencing a great deal of trouble with their internal Payable Audit System (PAS) and how it would purchase goods; receive goods and pays for them. They are challenged with the redundancy and the lack of productivity to their system. They were finding ways to lower costs and eliminating steps in how these processes are getting accomplished. They decided that they needed to change their system and the way they did things at their business. There are some people, their roles and departments that will be closely involved with the process of this project. Some of these important roles will come from Ted Anderson director of disbursements, Peter Shaw the user project manager and Linda Watkins project director for the Payable Audit System (PAS). In addition, the Steering Group and the IS management department will have some important roles to the project too. Finally, there will be several major problems with the development of the project and how the one person would deal with these issues.
The financial services industry is one of the few sectors which is highly regulated, since its impact is directly proportional to the economy of the country it is also very closely followed by the media as well. Thus, most of the companies within this industry have highly structured procedure’s and processes in place for each department and how the job duties should be performed.
Responsible to provide information and counsel in the areas of risk of business,marketing,budgeting,return of investment,pricing,costing and overall business planning strategies.
Recommend ideas on process improvements in order to minimize the risk of future embezzlement. Be sure to discuss the cost versus benefit aspect of any internal control.
Romney, Marshal, and Paul Steinbart. Accounting Information Systmes. 10th ed. Upper Saddle River: Pearson Education, 2006. 193-195.
An example of a control that Starbucks should have in regards to cash is, having the cash balance of the register drawer being counted and signed off by management before the employee previously running that cash register can leave for the day. Another control around cash that Starbucks should have is: cash sales should be matched to the registers cash sales receipts, and the receipts should be kept so a different employee can use them the deposit. Also, another set of these register receipts and copies of the deposit slips should be kept to do a bank reconciliation with at the end of each month to ensure all of the cash got deposited correctly. Also, by utilizing the segregation of duties theory for this cash counting and depositing activity limits the ability for there to be misappropriation of
If recorder are missing are incomplete or missing, question may arise. It is the responsibility of the treasure to make sure all records ate being completed and filed, even if someone else is doing the bookwork. Accounting for the budget is critical to the integrity of the church’s financial plan. Anytime money is received, at least two church members should be present to assume responsibility for those monies. Money should be counted in a place where reasonable security can be maintained. As soon as possible it should be deposited in the church’s bank account. Under no circumstance should money remain in a house are church overnight. Procedure for the accounting and maintaining church fund should follow this
The management of cash is essential to the survival of any organization. Managing an organization’s financial operation requires knowledge of the economy and ways to maximize revenue. For any organization to operate on a daily basis adequate cash flow is required. Without cash management the organization will be unable to function because there is no cash readily available in case of inconsistencies in the market. Cash is also needed to keep the cycle of the company’s operations going.
...le, in order to reduce fraud or errors. In this case different people are involved in indicating cash inflows and outflows, verification of the cash flow and the actions that translated to such cash flows. For example, the authorization function requires a supervisor to authorize a purchase order. Then the recording function involves an accounts receivable clerk to match the order before billing clients. The teller takes custody of the money whether directly or indirectly, that is, receipts of cash, checks and credit cards. The internal audit department then conducts reconciliation to establish whether fraud has been committed. This chain of information separation in an organization reduces chances where conflict of interest may arise. For instance, if the audit team handles cash and/or assets and at the same time conduct audits, a conflict of interest may arise.
I spoke with the Financial Controller and advised to handle the duties of payable and receivable. Furthermore, the payroll work would be divided between us. In order to succeed, I concentrated in replying to emails, taking phone calls, processing credit cards, etc. from 9 am to 2 pm. After 2 pm, I focused on solving disputes or urgent issues concerning customers and suppliers without hampering daily