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.
Due to this, the confirmation process has become of high risk. Third party intermediaries have been established to assist in this process by securely transmitting information to the bank and validating the authenticity of the respondent. The use of third-party intermediaries makes it more difficult for anyone to alter confirmation requests. There are risks that come with the use of third party intermediaries because the intermediary’s control weaknesses or deficiencies fall on the auditors as well when relying on confirmations received through them. Auditors must assess that the intermediary’s system of internal control has been designed and is operating effectively to meet the PCAOB
One must understand that the integral core of a company rests in its accounting and financial areas. The departments’ need employees with an advanced knowledge and skill set to ensure the payment of supplies and accounting on the expenditure is correctly recorded. If the accounting desk presents inaccurate spending calculations on behalf of the company, it could result in spending more than what has actually been earned; this could lead to the company not only being unable to increase in revenue, but also experience loss. It is imperative that the management of the financial department is well informed and able to make decisions by taking into account the usage of every coin stated in the expenditures, and also to know the amount of revenue the company is making so that we can plan on better strategies to improve the revenues (Lu, Madu, Kuei & Winokur, 1994).
Romney, Marshal, and Paul Steinbart. Accounting Information Systmes. 10th ed. Upper Saddle River: Pearson Education, 2006. 193-195.
* Manage the purchase of equipment and ensure all appropriate accounts are funded, obligated and adjustments processed
Net salary in a money-related year can be dispersed among recipients in a way which limits add up to wage impose payable by the family. On the off chance that recipients are under 18 years old, by appropriating wage to them, trustees can profit their tax-exempt edge and low pay refunds. On the off chance that there are no individual recipients in minimal assessment rate lower than organization charge rate (30%), at that point trustees can disseminate pay of the trust to organization and pay impose on the wage at the organization assess rate. (Trustdeed, n.d.)
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.
There are several important people involved with this project and will help with the necessary changes needed for the Payable Audit System (PAS). Each person has a very detailed job description and the skills that would be used to make the changes to the system. First, Ted Anderson the director of disbursement began to notice how their current system was very labor-intensive. He knew of other ways to increase the productivity to the system and he would help in the plan to transform these changes. First, he changed the mind-set of how the system would work, and he organized a difficult training course with a 9 month duration designed for the employees. With his role on this project the company will make several fundamental changes, to pay the invoices in their tolerance. Keeping all history transactions, they would adopt a quality-control approach. Also eliminating all their paper files they would develop a Document Control System (DCS), where they would scan all of their documents into their computer system.
The second step is entering the transactions of the period in appropriate journals. This step consists of taking the journal entries, assigning each to an asset, liability, equity, expense or revenue account(s) to debit and credit. This can be done by almost anyone. I have had jobs where the bookkeeper does the journal entries and figures out which accounts are affected. I have also had jobs where anyone from a receptionist to a staff accountant does this step. If the person doing the journal entries does not have a background in accounting, or is unfamiliar with which accounts are affected, the person submitting the source documents will write down which accounts should be debited and which should be credited. This practice makes doing the journal entries little more than data entry, which can be done by nearly every employee.
The oversight responsibilities of the board, the CAE lacking of expertise or broad understanding of financial controls and responsibilities, and the understaffed internal audit functions lacking of independence and direct access to the board of directors contributed to the absence of internal controls. To begin with, the board should be retrained to achieve financial literacy to review financial reporting. Other than attending formal meetings, the board of directors should be more involved with the management. For the Audit Committee, the two members who were recruited as acquaintances to Brennahan need be replaced with experts who are more sufficiently knowledgeable about accounting rules beyond merely “financially literate”. Furthermore, the internal audit functions need to expand with different expertise commensurate with the expanded activities of the organization, testing financial reporting rather than internal controls from an operational perspective. The CAE should be more independent and proactive to execute audit plans, instead of following orders from the CFO, and initiate a direct and efficient communication between internal audit and audit
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
Company policy requires the cash to be received before or after rendering a service. Due to some business reasons, the management has been extending credit to clients contrary to the guidelines.
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.
With Jacob’s financial pressure, his integrity is shaken because he wants to use the money to pay off the bills and Jacob did not mention it to Krystal. Jacob needs to put his personal matter aside and communicate his medical situation and the bonus money to Krystal. By doing so, Jacob will maintain his honesty and not let his personal interest be in the way resulting trust within the workplace will be maintained. Additionally, the bonus money can be fairly divided between the two. Employees have the responsibility to follow and maintain business ethics and the code of ethics in the workplace. Employees have to be honest, communicate at all levels of the organization, deal issues at the lowest possible level, and avoid conflict of interest that would lead to unethical decisions. Also, employees should be educated with the policy and regulations set by the company in order to maintain ethical practices in the workplace. Jacob and employees in general are bombarded by ethical issues and by abiding by their roles and responsibilities will guide them in making an ethical decision. The following five-step model can help employees make appropriate decisions when faced with an ethical dilemma. First step is to recognize the issue. Knowing what is the root cause and the main
Since the procurement manager is responsible for executing contracts for most companies, the Agent should support the project manager in making sure the technical aspects, schedule, scope, and risk are captured completely in the SOW. In closing, this paper examines the legal aspects of procurement management, along with how procurement management can be an effective tool for managing projects. This paper focused on the basics of common contract laws, the basics of agency law, the Uniform Commercial Code (UCC), and some aspects that pertain to the Federal Acquisition Regulations (FAR). The company’s position on deciding not to procure all of the material in a contract was examined, along with how that position can be strengthened by understanding the legal aspects of procurement management. Finally, the paper analyzed how the project manager is supported by the contract management function.