AKW 104 ACCOUNTING & FINANCE

Lecture 4 : Cash & Internal Control

Dr Cheah Soo Jin

Internal Control
It is the process to ensure financial information is complete,
accurate, and reliable.
To reduce risk of asset loss
To comply with laws and regulations
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The Internal-Integrated Framework

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Control Environment
Control refers to management action to
enhance risk management, and increase the
likelihood of achieving goals and objectives.
control environment consists of corporate
philosophy & culture, allocation of
responsibility and reward.

Risk Management
Risk refers to the uncertainty of an event
occurring that could have a negative impact
on the achievement of objectives.
Risk management involves the identification
and assessment of risk
Strategies to reduce exposure to risk and to
mitigate the impact of risk occurring.
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Information & Communication

Information is a vital resource of any
organisation.

A good system must ensure pertinent

information be captured and communicated in
a reliable and timely manner to the
appropriate stakeholders.

Control Activities

Control activities include the policies and procedures relating to:

- approving and authorisation

- verifications and reconciliations (internal audit)

- reviews of operating performance

- security of assets

- segregation of duties

Monitoring
Effective control requires continuous monitoring
and assessment
Monitoring could ongoing or periodic
Ongoing monitoring is continuous assessment
Periodic monitoring is done on an ad hoc basis
and can be used to supplement ongoing
monitoring.
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Internal Control Procedures

Assignment of responsibilities clear
instructions accountability
Promote ethical, competent & reliable
employee qualities
Documents & audits
Separation of duties
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Cash Management
accurate recording of cash transactions
Reduce losses from fraud & theft
Ensure enough cash flow to meeting operating
requirement
Avoid leaving large sum of idle cash balance
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Cash Receipts
Cash receipt over the counter
(cash register, Point-of-Sale terminal)
(tally & verifications)
Cash receipt by mail
Monthly Statement of Accounts to be posted
to debtors
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Cash Payments
Avoid cash payments in large sums
Cheques and authorization
Voucher system approving authority

Petty cash Imprest system (a fixed amount is

reserved, which after a certain period of time or
when required, will be replenished)
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Bank Account
Signature card
Deposit Tickets/paying-in slips
Cheques
Electronic Fund Transfers (EFT)
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Bank Statement
Monthly records of transactions in the bank
current accounts.

Should verify with companys own records.

Prepare a Bank Reconciliation to compare and
explain the differences between own records
and bank statement.
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Differences between own records and

bank statements
unpresented(outstanding) cheques
Uncredited cheques (deposit in transit)
Bank charges (e.g. service charge, GST, stamp
duty) not recorded in own account books
On-line payments by customers
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Bank Reconciliation Statement

Refer to page 92

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End of the Lecture 4

MCQ on Page 23
MCQ on Page 56

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