Question

The following are some “suspicions”; you have been requested to select some effective extended procedures designed to confirm or deny the suspicions.

Required:
Write the suggested procedures for each case in definite terms so another person can know what to do.
a. The custodian of the petty cash fund may be removing cash on Friday afternoon to pay for weekend activities.
b. A manager noticed that eight new vendors were added to the purchasing department’s approved vendor list after the assistant purchasing agent was promoted to chief agent three weeks ago. She suspects all or some of them might be fictitious companies set up by the new chief purchasing agent.
c. The payroll supervisor may be stealing unclaimed paychecks of employees who resigned and did not collect their last check.
d. Although no customers have complained, cash collections on accounts receivable have decreased and the counter clerks may have stolen customers’ payments.
e. The cashier may have “borrowed” cash receipts, covering this by holding each day’s deposit until cash from the next day(s) collection is enough to make up the shortage from an earlier day and then sends the deposit to the bank

Answer 1

Ans : PLEASE GV A RATING IF U LIKE MY EFFORTS , IT WILL KEEP US MOTIVATED. THANK YOU In Advance

We are assuming in the above question that we are Internal Auditor of the co . and installing audit procedures .

Firstly , we should understand what is Internal audit ?

Internal Audit is a department or an organization of people within a company that is tasked with providing unbiased, independent reviews of systems, business organizations, and processes. The role of Internal Audit is to provide senior leaders and governing bodies of an organization an objective source of information regarding the organization’s risks, control environment, operational effectiveness, and compliance with applicable laws and regulations.

Those individuals working in Internal Audit are called internal auditors. Internal auditors may cover all areas of an organization or specialize based on their skill-sets.

The aim of internal audits is to identify weaknesses within the organization’s processes and control environment internally so that they can be fixed as quickly as possible to prevent harm to the organization.

Internal Audit Planning Checklist

1. Initial Audit Planning

2. Risk and Process Subject Matter Expertise

3. COSO’S 2013 Internal Control – Integrated Framework

4. Initial Document Request List

5. Preparing for a Planning Meeting with Business Stakeholders

6. Preparing the Audit Program

7. Audit Program and Planning Review

Now , coming to our question in hand the following are some suggested procedures which the co should follow :

a)

i. Introduce the cameras in the sheltered storage space and the entrance is offered uniquely to ranking staff as opposed to the clerk.

ii. Recording of precise section of frivolous money staying with the overseer at end of the day.It is hard to the caretaker to supplant the category later. Irregular checking of register.

iii. Conduct a surprise petty cash count first thing on Monday morning.

iv. Bring an audit log, which is a running tally of petty cash totals over time.

v. Count the currency and coin. Also, count the value of postage stamps or negotiable instruments (like traveler's checks or bonds) stored with the petty cash.

vi. Add the cash total to the voucher total. This amount should equal the cash amount noted at the last audit.

b)

i. Background check to be done to all the vendors for financial viability and reputation in the market.And for the undesired vendors,investigate how these vendors were approved by the responsible persons before removing from the list.

ii. Documents should be checked to confirm whether all the procedures were followed when adding vendors to the approved list .

iii. Check recent orders for all the vendors who were invited to give quotations with the old and trusted list. In case of new vendors , investigate them with respect to prices to over come the billing and other manipulations.

iv. Select three – four vendors randomly and determine whether the company's approved vendor procedures have been followed.

v. Verify the existence of the vendor physically.

c)

i. Paychecks data base is properly maintained .The custody and register should be with two different persons.

ii. All the non issued paychecks should be collected back and matched with the records. Paychecks other than specific time should be cancelled.

iii. Select a payroll register from a recent pay period and verify that all employees signed for their paychecks.

iv. Compare the list of names in payroll register to a list of resignations of previous 6 months to discover any names on both lists.

v. Examine endorsements on cancelled checks.

vi. Have the personnel department maintain a record count of the number of employees and check it against a record count generated during each payroll-processing run.

d)

i. Balance amount to be received from the customers should match the books and any discrepancies should be investigated.

ii. Receivables should be serially numbered and the supervisor should check them with the actual cash collections.

iii. Conduct an internal trade receiveable circulation by requesting that customers verify their account balances directly to the internal audit office.

e)

i. Cash collections is recorded with exact denominations of currency.

ii. The deposit time should be decided by the senior and mostly it is preferable in; the morning time .

iii. Select Any One deposit randomly from the previous month and agree the deposit details (checks and cash make-up and names of payees on checks) to the customer receipts.