1 Planning and Control of Cash and Short term Investments ACCT7320-Dr. Bailey-Fall 2009 Thanks for the contributions of Michelle Strickland and Michelle Tung

2 Fraud: Cash Receipts Major Risk associated with Cash Receipts is the misappropriation of funds. Common schemes: Lapping Lapping Overstating Discounts Overstating Discounts Writing Off Accounts Writing Off Accounts Failure to Record All Sales Failure to Record All Sales

3 Fraud: Cash Disbursement Misappropriation schemes include: Preparing false vouchers or presenting vouchers twice for payment Preparing false vouchers or presenting vouchers twice for payment Changing check amounts Changing check amounts Understating cash discounts Understating cash discounts Cashing unclaimed payroll or dividend checks Cashing unclaimed payroll or dividend checks Forging checks Forging checks

4 Cash Control Procedures Primacy of segregation of duties Ensure employees take vacation at least annually. Ensure employees take vacation at least annually. Assign another employee to perform job duties during absences and periodically. Assign another employee to perform job duties during absences and periodically. Periodically and without warning reassign job duties. Periodically and without warning reassign job duties.

5 Cash Control Procedures All disbursements by check All disbursements by check All documents pre- numbered All documents pre- numbered Checks over $1000 (?) should require two signatures Checks over $1000 (?) should require two signatures Disbursements have proper documentation Disbursements have proper documentation Vouchers should be marked paid to prevent duplicate use Vouchers should be marked paid to prevent duplicate use Petty cash vouchers in ink or typewritten Petty cash vouchers in ink or typewritten Employees bonded Employees bonded Bank Reconciliations monthly [daily?] Bank Reconciliations monthly [daily?] Separate account maintained for payroll Separate account maintained for payroll Restricted access to checks and signature stamps/plates Restricted access to checks and signature stamps/plates …against misappropriation of cash disbursements

6 Bank Reconciliation The reconciling of the balance per bank statement with the balance per books. The reconciling of the balance per bank statement with the balance per books.   The employee who performs the bank reconciliation should not be involved either in the receipt or disbursement of cash.

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