a) To ensure all cash receipts are recorded in the cash book. To ensure cash is safeguarded to prevent theft. To ensure cash receipts are recorded in the correct accounting period. b)
Key Control Test of Control
Caterpillar Co has an internal audit Review the Internal audit file to confirm department which that the 20 stores were visited and for has undertaken a number of internal exceptions noted and actions taken. control reviews specifically focusing on cash controls at stores during the year. The existence of an internal audit department reduces the risk of fraud and will ensure the stores adhere to the policies and procedures. At the end of each day, the tills are Discuss with the store manager about closed down with daily readings of sales the discrepancies identified and the taken from each relevant follow up action taken to till. These are reconciled to the total of resolve. the cash in the tills and the credit card payment slips and any discrepancies are noted. If there is any discrepancy that can be identified on a timely basis and reduce the risk of fraud as employees are aware that the assistant manager will perform reconciliations. The cash is received by sales is Observe the process being carried out transferred to the bank via collection by by the security company. a security company. This ensures cash is safeguarded and the risk of theft during transfer is minimised.
c)
Control deficiency Recommendation
Caterpillar Co has 45 stores out of which only the largest 20 stores are The IA should visit every store on at visited by the IA dept. least once annually. There is a risk that the other 25 stores might not operate effectively and errors may go undetected since they know that they will not be visited by the IA dept. All employees based at the store are Only employees with log on codes able to use each till and individuals do should be able to use, and each not employee should have a designated till have their own log on codes, although employees tend to use the same till each day. Allowing all employees to use all the tills will make locating error difficult. Where employees’ friends or When a friend/family of an employee family members purchase clothes in comes to the store an unrelated store, the employee is able to serve employee should serve and a supervisor them at the till point. should ensure appropriate amount is There is a risk that the employees might charged. give their friends/family undue discounts which will have a negative effect on the company To save time, this reconciliation is done For better control purpose, the assistant by the store’s manager should reconcile the sales day assistant manager in aggregate for all of book with the total cash separately for the store tills together. each till. Reconciliation of all the tills together will make identifying errors and discrepancies difficult. , the cash is stored in the shop’s small The cash should be banked on a daily safe overnight . basis but should be at the time the store The cash is at risk of theft. closes. The clerk is responsible for a numerous The responsibilities should be split elements o the cash system. between different individuals. There is lack of segregation of duties, which increases the risk of fraud and timely identification of errors