Question

Evaluating Internal Control of Cash

The following procedures were recently installed by Raspberry Creek Company:

1. After necessary approvals have been obtained for the payment of a voucher, the treasurer signs and mails the check. The treasurer then stamps the voucher and supporting documentation as paid and returns the voucher and supporting documentation to the accounts payable clerk for filing.
2. The accounts payable clerk prepares a voucher for each disbursement. The voucher along with the supporting documentation is forwarded to the treasurer's office for approval.
3. Along with petty cash expense receipts for postage, office supplies, etc., several postdated employee checks are in the petty cash fund.
4. At the end of the day, cash register clerks are required to use their own funds to make up any cash shortages in their registers.
5. At the end of each day, all cash receipts are placed in the bank's night depository.
6. At the end of each day, an accounting clerk compares the duplicate copy of the daily cash deposit slip with the deposit receipt obtained from the bank.
7. All mail is opened by the mail clerk, who forwards all cash remittances to the cashier. The cashier prepares a listing of the cash receipts and forwards a copy of the list to the accounts receivable clerk for recording in the accounts.
8. The bank reconciliation is prepared by the cashier, who works under the supervision of the treasurer.

Required:

Indicate whether each of the procedures of internal control over cash listed above represents (1) a strength or (2) a weakness.

Item	Strength/Weakness
a.
b.
c.
d.
e.
f.
g.
h.

Answer 1

a. Strength

Treasures is obtaining necessary approvals before he stamping and sending along with support documents for payments . Here internal of cash is strong

b. strength

For Cash disbursal cash paymanent officer is preparing and sending the voucher for approval . there is two layers of checking the voucher and disbursmnet of cash . and also cashier taking approval of higher authoity . Here alos internal control of cash are strong

c. Weakness

Petty cashier can not hold postdated checks of employees , it might leads to misappropriation of cash . He may mis use the company cash with employees post dated checks. It is weakness in internal control of cash

d. Weakness

Cashier cannot bring his own cash into business . which alo leads to misappropriation of funds. it is also weakness in interanal control of cash

e. Strength

Making of deposting of all cash into bank at the end of businees hours is good practice . it removes the cahnces of theft . Cash is more voulnerable to theft . it is strongest control of cash

f. Strength

Cross checking of deposit slip with slip obtained from bank is a vry good practice . it ensures that no cash is missed and embazzeled . all are deposited in bank properly and got credited in companies account correctly

g. Strength

Here transaction is passing in layers . when more layers involved , transaction may takes time to complete but no unathorized transaction will happen . Mail clerk , cashier and payble officer can cross check thier lists . No authorised transactions will be missed and no un athorized transaction will be done

f. Weakness

Bank recocilaition statement shall be prepared by person other than cashier . Then only managment can find if any missappropriation was made . Based on the cashier BRS we should not belive all are correct . It should be done by person other than cashier. in the given organisation cashier is preaparing BRS . So it is not good practice . it is a weakness in the internal control of the cash