1. Fraud, Internal Control, Cash
Chapter 8
Fraud, Internal Control, Cash

2. Fraud What contributes to fraud? Opportunity Financial Pressure
Rationalization

3. Six Principles of Control
Establishment of responsibility
Segregation of duties
Documentation procedures
Physical controls
Independent internal verification
Human resource control

4. Petty Cash Procedures
Petty Cash is a small fund that is kept in the business to pay expenses that cannot be paid by a check.
Refreshments
Parking
Tips

5. Three Steps in a Petty Cash Fund
Establish the Fund
Entry:
March 1 - Petty Cash 100
Cash

6. Making Payments From Petty Cash
When money is taken, there should be a voucher or receipt placed in the box.
The voucher or receipt shows the amount, date, who the payment was made to, the person approving it and what the payment was for.

7. Replenishing the Petty Cash Fund
Add up all the vouchers
Entry
March 15 – Postage Expense 44
Miscellaneous Exp 10
Cash
The $54.00 is put in the box to bring the fund back up to $100.
**Sometimes the vouchers(receipts) do not exactly match, then you have to use an account called “short and over”.***
DO E8-7 and E8-8 Page 381

8. Bank Procedures Deposits Checks
Verification of a deposit should always be retained by a business.
Deposits are added to cash balance
Checks
Three parts to a check
The bank name, the date
The payee to whom the check is payable
The person signing the check
Checks are subtracted from the cash balance

9. Bank Reconciliation
At the end of the month, the bank sends the account owner a statement either by mail, electronically or both.
The statement gives the information on
Checks Paid
Deposits Recorded
NFS Checks
Service Charges
Debit Memos
Credit Memos
The bank balance and your cash balance will not match, so you have to reconcile.

10. Steps in a Bank Reconciliation
Deposits in transit
The company recorded them but they have not been recorded by the bank
Add to bank balance
Outstanding checks
Issued checks recorded by the company but have not been cashed by the bank.
Subtract from bank balance

11. Steps Continued Look for errors Bank memoranda Service Charges
Checks with the wrong amount
Deposits with the wrong amount
Bank memoranda
NSF Check (DM)
Subtract from check register
Charge for printing checks (DM)
Collection of a notes receivable (CM)
Add to check register
Service Charges
EFT – Electronic Funds Transfer can either be added or subtracted
Example on Page 370 and Journal Entries Needed