List down some control activities relating to petty cash Auditing Help

1. Petty cash box should be kept in the safe
2. Petty cash vouchers should be pre numbered
3. Petty cash imprest should not be too excessive
4. Petty cash funds should not be used for large amounts
5. Petty cash vouchers should be signed by an independent official
6. Petty cash should be counted regularly and on surprise basis.

Following is the payroll system of a medium sized manufacturing company.
The personnel department carries out initial screening of new employees.
The applications are short listed and those who appear to be satisfactory are referred to management.
When the employee enters the factory, he punches the card on the time clock. The employee also punches his card when he leaves the factory. The workers are paid from the time of punching the card at arrival till he leaves. Card punching process is not monitored.
The workers are under the supervision of foremen who record time spent
on eachjob. An assistant in the payroll department enters hours worked, computes employees earnings for the month and prepares wage envelopes. The paymaster distributes the envelopes to employees after ensuring the employee identity. You are required to suggest improvement in the system. 

Duties of payroll preparation and time maintenance should be segregated. Also, duties of payroll computation and preparation of wage envelopes should be segregated.

The time clock should be supervised to verify that the employee punches his own card only.

Payroll department should compare hours worked from the time clock system to wages allocated to various jobs.

Payroll should be independently checked and approved.

Unclaimed wages should be adequately controlled. Employees should be asked to sign receipt for collection of wages.

The work of the assistant who enters the hours worked and computes the wages should be independently verified to ensure errors do not occur in computation of wages.

An independent official should review payroll for reasonableness of rates of pay and hours worked.

List some possible weaknesses in the system of petty cash and recommend improvements with reasons for each recommendation.

Weakness

Petty cash vouchers are not authorized

Recommendation

All petty cash vouchers should be appropriately authorized to prevent unauthorized payments

Weakness

Imprest is too high in comparison to monthly average expenditure

Recommendation

Petty cash imprest should be slightly higher than monthly average expenditure in order to minimize chances of misappropriation

Weakness

Petty cash is maintained in the drawer of the cashier.

Recommendation

Petty cash should be maintained in a secured cash box to avoid mixing of personal cash with office cash

Weakness

Reimbursements are sometimes made without supporting documents

Recommendation

All reimbursements should be supported by approved documents to avoid false claims

Weakness

Petty cash vouchers are not pre numbered

Recommendation

Pre numbering of petty cash vouchers will reduce chances of misappropriation and provide a check on completeness in recording expenditure.

Weakness

Petty cash reimbursement cheque is issued without review of supporting documents
Recommendation

Reimbursement vouchers should be reviewed by the cheque signatory to verify that all payments are approved and the reimbursement cheque agrees with actual expenditure.

List down some control objectives regarding occurrence assertion of
purchases of goods and services.

Amounts recorded in purchases and payables represent goods or services received.
Adjustments to payables are approved.
Amendments to suppliers master file are approved.
Purchase orders are based on approved requisitions.
Expenditure is made for the purpose of business
Business conducted and  expenditure incurred is in accordance with company objectives

Posted on November 3, 2015 in Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment

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