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.
Petty cash vouchers are not authorized
All petty cash vouchers should be appropriately authorized to prevent unauthorized payments
Imprest is too high in comparison to monthly average expenditure
Petty cash imprest should be slightly higher than monthly average expenditure in order to minimize chances of misappropriation
Petty cash is maintained in the drawer of the cashier.
Petty cash should be maintained in a secured cash box to avoid mixing of personal cash with office cash
Reimbursements are sometimes made without supporting documents
All reimbursements should be supported by approved documents to avoid false claims
Petty cash vouchers are not pre numbered
Pre numbering of petty cash vouchers will reduce chances of misappropriation and provide a check on completeness in recording expenditure.
Petty cash reimbursement cheque is issued without review of supporting documents
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