Controls and Processes" discusses the revenue and cash collection process and controls. Exhibit 8-16 shows some...

Controls and Processes" discusses the revenue and cash collection process and controls. Exhibit 8-16 shows some cash receipts controls and risks. What are some of these controls? How can a company help protect itself in the cash collection process from a potential fraud?

Expert Solution

Exhibit 8-16 shows some cash receipts controls which are as follows:

Authorisation:

Only Designated person opens ans closes bank accounts.
Cash Reciepts are approved prior to bank deposit.

Segregation of duties:

Separation of custody of cash from responsibility of reconciling bank accounts.
Separation of custody of cash from accounts recievable record keeping which minimises the risk of invalid cash receipt or ommitted transactions.
Separation of duties related to cash reciepts journal preparation, credit approval, inventory handling,information systems and general accounting.

Security:

Physical Controls in areas where cash is recieved.
There should be proper IT controls over computer records and physical controls over record storage areas.
Cash reciepts should be deposited in bank on daily basis.

Records and Documents:

Preparation of deposit slips on prenumbered forms.
Preparation of customer accounts statements.
Preparation of cash reciept journals and accounts recievable re cords only when cash has actually been recieved.

Independent Checks and Reconciliation:

cash counting and comparison of daily deposit with cash reciept journal.
preparation of bank reconciliation statement.
matching of remmittance advice with cash reciept journal.

A company can protect itself from a fraud in cash collection process by segregating duties and impleting variety of internal controls to protect its valuable cash.

ekkarill92 answered 1 year ago

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