ADIGRAT UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

ASSESSMENT ON INTERNAL CONTROL OVER CASH SYSTEM

(A CASE OF COMMERCIAL BANK OF ETHIOPIA ADIGRAT MAIN BRANCH)

(A SENIOR ESSAY SUBMITTED TO THE DEPARTMENT OF ACCOUNTING AND

FINANCE IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE
BACHELOR OF ARTS (BA) DEGREE AWARD IN ACCOUNTING AND FINANCE)

BY: ABEYA MARGA

ID NO:2536/05

ADVISOR: PAULOS G.

JUNE, 2015

ADIGRAT, ETHIOPIA
Acknowledgement

First and for most I would like to thank the almighty God for his blessing and making me
complete this paper successfully. Next, I would like to extend my deepest gratitude and
appreciation to my advisor, Paulos G. for being with me with his constructive comments from
the beginning to the end of the paper work. I would also like to thank my families for their
material and moral supports. Finally, I would like to thank the department of accounting and
finance for pre paring the confirmation letter, the librarians of the University for their help in the
library and others who collaborated me in making the paper real.

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Abstract

The concept of internal control over cash is relevant because cash is the most liquid asset and
offers the greatest temptation for theft, embezzlement, and misappropriation.

This study was designed to assess commercial Bank of EthiopiaAdigrat Main Branch’s current
practice of internal control over cash, its adequacy and effectiveness. In order together the
necessary information for the study, both primary and secondary data were used. Most of the
data were collected from primary sources using questionnaire.

After analyzing and interpreting the collected data conclusions and recommendations were given
based on the results of the study

The findings indicated that there is in effective control over deliberately cash shortage created
by tellers, lack of segregation of duties with respect to the safe vault and no surprise cash count.
The research also revealed that bank reconciliation is not made on regular basis.

As a remedy to internal control over cash deficiencies observed, the research recommended
introducing surprise cash count, a voiding reliance on one individual, making bank
reconciliation regularly, designing control mechanism over deliberately created cash shortage.

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 Table of contents

Contents Page

Acknowledgment…………………………………………….………………………………...…..…… i
Abstract……………………………………………..………………………………………………...… ii
Table of content ----------------------------------------------------------------------------------------------------- iii
List of tables…………………………………………………………………………….……………….. v
Acrimony……………………………………………………………………………….………………….vi

CHAPTER ON

1. Introduction……………………………………………..……………………………………….… 1
1.1. Background of the study ……………………………………………………………………………. 1
1.2. Statement of the problem…………………………….………………………..…………………...... 2
1.3. Objectives of the study …………………………………………...………………..…………………3
1.3.1. General objective…………………………………………………………..………….……... 3
1.3.2. Specific objective of the study ……………………………………………….….................... 3
1.4. Significance of the study……………………………………………….………...…………………... 3
1.5 Scope and limitations of the study………………………………………….……………. ………... 4
1.6 Research Methodology……………………….…………………………….…...…………………..... 4
16.1. Research design………………………………………….……………………………….... 4
1.6.2. Type and source of data…………………………………….…………………………..…...…5
1.6.3. Sampling techniques…………………………………………….……………………..….. 5
1.6.4. Data analysis and presentation…………………………………….…………………..…… 5
1.7. Organization of the study…………………………………………………….………………...…… 5

CHAPTER TWO

2.1. Introduction……………………………………………………………………..………………...……6
2.2 Types and objectives of Internal control………………………………………………..…………...….7
2.2.1 Internal accounting control…………………………………………………………….....……..7
2.2.2 Internal administrative control………………………………………………………….....…….7
2.2.3 Objectives of Internal control…………………………………………………...…………..…...7
2.3 Need and Elements of internal control…………………………………………………………..….….8
2.3.1 Need for internal control………………………………………………………………..……….8
2.3.2 Elements of Internal control……………………………………………………...…………....…9
2.4 Advantage and Techniques of evaluating Internal control………………………………………...….10
2.4.1 Advantage of Internal control…………………………………………………………..……….10.
2.4.2 Techniques for evaluating of Internal control system……………………………………………10
2.5 Internal Audit, Internal Check and internal control……………………………………………..…….11
2.6 Cash and its composition and importance………………………………………….……………….…12
2.6.1 Cash and its composition……………………………………………………………………..…12
2.6.2 Importance of cash……………………………………………………….…………………..….13
2.7 Cash management…………………………………………………………………………………..…13
2.7.1 Controlling cash receipt and disbursement……………………………...……………………….13
2.7.2 undeposited cash………………………………………………………...………………………..14
2.7.3 Cash in bank-deposit…………………………………………………...…………………..……..14
2.7.4 Cash in bank-issuance of deposit………………………………………………………..………..14

2.7.5 Control of disbursement cheque…………………………………...…….…………………….…15

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 2.7.6 Petty cash………………………………………………………...………..………………………15
2.7.7 The bank statement……………………………………………….…………………………….…16
2.7.8 preparing the bank reconciliation………………………………….………..…………………....16

CHAPTER THREE

3 Introduction…………………………………………………………………...…………………………18
3.1 characteristics of respondent……………………………………………………...…………………..18
3.2 Internal control over cash receipt……………………………………………………....……………..20
3.2.1 Segregation of duties related to cash receiving transaction……………………...….…………..21
3.2.2Cash diffirences and indemnity allowance…………………………………...……………….....21
3.2.3 comparision of the deposit ticket with the cash receipt journal……………...……………….…22
3.2.4 Cash area……………………………………………………………...…………………….…..22
3.2.5 Handling or keeping recieved ( deposited cash safety)……………………...………………….22
3.3 Internal control over cash payment………………………………………………..…………………..24
3.3.1 segregation of duties related to cash payment……………………………….………….…….…26
3.3.2 The petty cash system………………………………………………………..……………..……27
3.3.3 Effecting payment through check…………………………..……………………………………28
3.3.4 The voucher system………………………………………..……………………………………..28
3.4 Controlling cash through bank account………………………..………………………….…………..28
3.4.1 Bank reconciliation………………………………………..……………………….…………...29
3.4.2 Cash proof……………………………………………….………………………..…………....30

CHAPTER FOUR

4.1 conclusions…………………………………………………….…….……………………………..….31
4.2 Recommendation………………………………………………....…………………………………...33
Bibliography………………………………………………………....……………….……………..…….vii
Appendix………………………………………………………….………………………………………viii

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LIST OF TABLES

Table 3.1; Respondents characteristics………………………………………………………….…...18

Table3.2; Analysis of questionnaire related to cash receipt……………………………………..…....20

Table3.3; Analysis of questionnaire related to handling of received cash……………………………..22

Table3.4; Analysis of questionnaire related to cash payment…………………………………….……25

Table3,5; Analysis of questionnaire related to controlling cash through bank account…………….…29

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 ACRONYMS

CBE; Commercial Bank Of Ethiopia

AMB; Adigrat Main Branch

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 CHAPTER ONE

1. INTRODUCTION

1.1Back ground of the study

One of the most important capitals to be engaged in any kind of business or activity is cash. Cash
is amedium of exchange that a bank wills accept for deposit and immediate credit to the
depositor’s account. Cash is the blood of any organization. But in another way, it is a means of
acquiring goods and services. Cash includes currency and coins, personal checks, bank drafts,
money orders, credit card sales drafts, and cashers’ checks as well as money on deposit with
banks. Cash is ready money. For accounting purposes, cash includes money in hand, petty cash,
bankaccount balance, customerchecks, and. It may also include the unutilized portion of an
overdraft facility or line of credit. (Pandey, 1999, 8th Ed.)

The mere existence of cash, however, does not guarantee the efficient and effective operations of
business organizations. For business organizations to be successful in their operations, they
should control their cash properly. This is because cash is readily and easily misappropriated and
embezzled so long as it is the most liquid asset unless a cost effective internal control system is
designed. Therefore designing a cost effective internal controls are necessary to assure that the
cash is used for proper business purposes and not wasted, dismissed or stolen.( Ron Weber,
1988)

Internal-control is defined as “The plan of organization and all the coordinate methods and
measures adopted with in business to safe guard its assets, check the accuracy and the reliability
of its accounting data, promote operational efficiency and encourage adherence to prescribed
managerial polices”. As in can be under stood from the definition internal control is wide in
scope and coverage involving both financial and administrative control. Internal control, is also
defined in accounting and auditing, is a process for assuring achievement of an organization's
objectives in operational effectiveness and efficiency, reliable financial reporting, and
compliance with laws, regulations and policies. A broad concept, internal control involves
everything that controls risks to an organization.(ALVIN A. ARENS, 2012)

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In addition to these, it is the arrangement of accounting system, in such a way the work of one
person automatically controlled by the work ofother person. It is a means by which an
organization's resources are directed, monitored, and measured. It plays an important role in
detecting and preventing fraud and protecting the organization's resources, both physical (e.g.,
machinery and property) and intangible.

Although cash and fall under the same category, the internal controls over cash and in the
general course of business are different. The most prominent difference between the controls
over cash is the proper segregation of duties. With cash, the receipts from cash and check must
be differentiated whereas in the case of, there is no segregation of duties. The controls over cash
must be more stringent and strict as it represents the cash in hand and there should be proper
control systems to avoid its misuse. With, there are less chances of misuse as the cash is in paper
form and is different from the one in hand. (Whittington/Pany

Now, internal control over cash is specific to cash control. It is a control mechanism whereby
different individuals process and authorize cash related transactions so that error and found will
be minimized or eliminated. This research paper will investigate the internal control system for
cash of commercial Bank of Ethiopia, Adigrat Main Branch. It tries to study or examine how the
bank is wing internal control system so as to manage and control its cash.

The study includes the treatment of cash receipts and payments, methods and procedures for
controlling cash, transaction affected through checks, bank reconciliations, petty cash fund and
reason for its establishment, replacement of petty of petty cash fund and other topics related to
cash control. (Johannes kinfu and Engida Boyou, 1999)

1.2. Statement of the Problem

Business organizations face many problems in relation to internal control over cash such as lack
of good internal control over cash. If the internal control system of cash of a business
organization is not good, the performance of the organization is affected negatively. Now, the
main aim of this paper is to investigate the internal control system for cash of commercial bank
of Ethiopia Adigrat main Branch. Based on the problem mentioned above, the study has assessed
the following questions.

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 1. What are the methods and mechanism for controlling cash?
2. What is the reason for establishing petty cash?
3. What is the role of bank reconciliation in controlling cash?
4. What is the role of cash proof in reconciling cash receipts and payments?
5. How the overall internal control over cash of the bank assessed?

1.3. Objectives of the Study

1.3.1. General Objective

The general objective of this study was to investigate the internal control over cash system in
Commercial Bank of Ethiopia Adigrat Main Branch.

1.3.2. Specific Objectives

The specific objectives of this assessment were;

1. To evaluate the mechanisms used by the bank for controlling cash.

2. To investigate the establishment and replenishment of petty cash fund in the bank.
3. To evaluate the role of bank reconciliation in controlling cash.
4. To evaluate the role of cash proof in reconciling cash receipts and payments.
5. To offer sound conclusions and recommendations based on the results of the study, etc.

1.4Significance of the Study

Cash is the most decisive capital in any organization cash, since it is the most liquid asset
requires designing an effective, efficient and reliable internal control system. Therefore a study
which is conducted on the internal control for cash has a paramount importance. In general the
researcher believes that the result of this research work.

 Will enriched the knowledge of readers on the internal control system for cash of the
bank.
 Will enable the management of the bank to identify the strength and weakness of the
internal controls system for cash so that they may take appropriate measures for the
identified problems.

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  Will give way for other researcher who wants to make further in fustigation in the area
and to conduct detailed research on the issue.
 May add to some existing literature and may serve as an additional source of reference.
 Widens the knowledge of the researches in the area i.e. internal control over cash, etc.
1.5.Scope and Limitation of the study
This study is concerned about the study of internal control over cash system in Commercial Bank
of Ethiopia - Adigrat Main Branch. The paper included internal control mechanisms which are
directly related to cash only. But other way, it doesn’t study about internal control system which
is not directly related to cash such as internal control over inventory. The paper covered methods
or mechanisms for controlling cash receipts, payments and also discussed issues related to
keeping deposits cash. In short, the study is confined to study internal control over cash system
in Commercial Bank of Ethiopia- Adigrat Main Branch.

While conducting this research, the researcher has faced the various problems like data
constraints that was very difficult to persuade the concerned officials of the bank to obtain data.
In addition to this, I couldn’t obtain advanced senior essay papers worked in the area within the
same industry; and the other is time constraint i.e., time was not sufficient enough to go further
for better findings and deep studies in relaxed manner. Because the researcher was under taking
this study in parallel to their regular classes. In addition to this the other major problem is cost
constrain particularly, in association with the current inflation, limited the study to some extent.
Lack of experience because the student researcher was beginner for under taking researcher is
also the other limitations.

1.6Research Methodology
1.6.1 Research Design
Both Qualitative and Quantitative types of research design are used for the purpose of this study.

1.6.2 Source and Method of data collection

To gather information about this research the researcher has used both primary and secondary
data sources. The primary data was collected through questionnaires distributions to employees
of CBE Adigrat main branch and secondary data were collected from the organizational
historical records related to internal control over cash and other written relevant sources.

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1.6.3 Sample Size and Sampling method
1.6.3.1 Sample Size
The total number of population in the bank is 60. Of these the number of males is 46 whereas,
the number of females is 14. Among these the researcher has selected 20% of the total
population that means 12 employees were selected by the sampling method prescribed.

The proportionate ratio of both males and females was obtained by;

46÷60×12=9

14÷60×12=3

So that, the sample selected is, nine males and three females.

1.6.3.2 Sampling Method

To collects available data the researcher was prepare questionnaires to distribute to the
respondents by using simple random sampling technique. The reason for using this type of
sampling technique was that it is less costly and less time consuming.

1.6.4 Method of Data Analysis

After collection of the necessary primary and secondary data, all the data was tabulated and
analyzed using statistical measure frequencies and percentage methods.

1.7 Organization of the paper

The first chapter was deal with the introduction part. Which include back ground of the study,
statement of the problem, and also the objectives, limitations, methodology, scope , significance
and organization of the paper are included in chapter one. The second chapter discuss about the
conceptual frame work of internal control by referring to definitions given by different authors
and concepts about internal control general and cash in particular. The third chapter is the main
part of the study i.e. data presentation and analysis. The fourth chapter brought this senior essay
paper to end with sound conclusions and recommendations.

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 CHAPTER TWO

2. LITERATURE REVIEW

2.1 Internal control Definition

Different authors and scholars define the phrase internal control differently. The followings are
some of such definitions. Internal control means “The system of controls, financial and other
wise, established and operating in the conduct of a business including the internal check, internal
audit and various other forms of controls.

Internal control implies “The whole system of control employed by the management in order to
carry on the business of the enterprise in an orderly and efficient way be having an automatic
check and balance over all the transactions”. According to the committee on auditing procedures
of the American institute of ratified public accounts internal control is define as “The plan of
organization and encourage adherence to prescribed managerial policy”

According to the council of the institute of chartered accounts of England and Wales, internal
control “Is the whole system of controls, financial and other wise, established by the
management in order to carry on the business of the company in an orderly manner, sale guard
its assets and assure as possible the accuracy and reliability of its records.

Well, in whatever way that one tries to define internal control, it seems that there is no much
difference between the sum and substance of the above definitions.

All of them stressed that internal control is a control mechanism that assures the accuracy,
reliability and the paper running of the operation of an organization and the proper usage of
resources.

The other thing that can be drawn from the above definition is that internal control is wide in
scope and coverage involving both counting and administrative controls. (Principle of auditing
and other assurance service, 19th ed. Whittington /pany.)

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2.2 Types and objectives of internal control

2.2.1 Internal accounting control

Internal accounting controls are those bearing directly up on the dependability of the accounting
records and financial statements. For example, preparation of monthly bank reconciliations by an
employee not authorized to issue checks or handle cash is an internal accounting control that
increases the probability that cash transactions are presented fairly in the accounting records and
financial statements.

Internal accounting control includes:- budgeting control, standards costing and deviation analysis
,internal check ,internal audit , bank reconciliation and self-balancing ledgers.

2.2.2 Internal administrative control

Some internal controls have little or no bearing on the financial statements and consequently are
not of direct interest to the auditors. Controls in this category are often referred to as internal
administrative control. Management is interested in maintaining strong internal control over
factory operations and sales activities as well as over accounting and financial functions.
According, management will establish administrative controls to provide for operational
efficiency for adherence to prescribed policies in all departments of the organization.

Internal administrative controls consist of ; time studies, motion studies , quality control,
performance appraise and statistical analysis.

(Principle of Auditing and other assurance service 19th Edition Whittington/Pany)

2.2.3 Objectives of internal control

A system of internal control consists of policies and procedures designed to provide management
with reasonable assurance that the company achieves its objectives and goals. This policies and
procedures are often called controls, and collectively they make up the entities internal control.
Management typically has three broad objectives in designing an effective internal control
system.

1. Reliability of financial reporting:- Management is responsible for preparing

statement of investors, creditors and other users. Management has both a legal and

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 professional responsibility to be sure that the information is fairly presented in
accordance with reporting requirement of accounting framework such as U.S.
GAAP and IFRS. The objective of effective internal control over financial reporting
is to fulfill these financial reporting responsibilities.
2. Efficiency and effectiveness of operation:- controls within a company encourage
efficient and effective use of its resources to optimize the company’s goals.
3. Compliance with laws and regulation:- publics, non-publics and not for profit
organizations are required to follow many laws and regulations. Some relate to
accounting only indirectly, such as environmental protection and civil rights laws.
Other are closely related to accounting, such as income tax regulation and antifraud
legal provisions.
The clients internal control system aims at providing reasonable assurance that.

 Records are valid, complete, and accurate.

 Record transactions are duly authorized.
 Transactions are properly classified and valued.
 Transactions are recorded at proper time.
 Transactions are properly posted to the ledger accounts, and correctly summarized.
 Detect and eliminate errors and frauds.
 Exercise moral pressure over the employees, and
 Ensure reliability of accounting information.
In general emanating from the above lists and other related literatures, it is logical to conclude
that the main objective of internal control is to assure and maintain the reliability and accuracy of
accounting and administrative procedures or tasks. (Audit and assurance service, 15th ed. Chris
Hogan, USA).

2.3 Need and Elements of internal control

2.3.1 Need for Internal control

 To exercise effective and efficient control over large size business organization.
 To give assurance about dependability of information.
 To verify compliance with company policies.

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  To plan the audit and determine nature, timing and extent of audit procedures, etc.
. (Audit and assurance service, 15th ed. Chris Hogan, USA).

2.3.2 Elements of internal control

Followings are the three divisions of the elements of internal control.

1. Plan of the organization

This involves the separation of an organization’s in to appropriate divisions, the appointment of

persons to assume responsibility there for the establishment of a clear line of responsibility
between each division and subdivision and the top management (e.g. board of director), and over
all coordination of the organization’s activities. It should be remembered in this connection that
the organizational structure of an entity serves as a frame work for the direction and control of its
activities and that an effective structure provides for the communication of the delegation of
authority and the scope of responsibilities. Equally important is the fact that proper functioning
of any system depends on the competence and honesty of those operating it. It naturally follows
that the qualifications, selections and training as well as the personal characteristics of the
personnel involved are important features in system of internal control.

2. Authorization, recording and custody procedures

The financial accounting control procedures are to ensure that the funds and the property of the
organization are kept under proper custody and may not be improperly applied, either by error or
intent; that expenditure may be incurred only after proper authorization, and is properly
accounted only after proper authorization, and is properly accounted for; and that all revenues
are properly accounted for and received in due course. These objectives can be achieved through
a suitable division of duties, the establishment of an appropriate accounting system and the
institution of forms of internal check, separation in compatible functions. Functions are
considered to be in compatible which, if combined would enable one individual to record and
process one transaction from beginning to end and hence may permit the commitment of frauds
and errors.

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3. Managerial saber vision and reviews (Including internal audit)

This involves the review by top management of an organization’s financial operations and
position at regular intervals by means of interim accounts, report, operating summaries and other
appropriate financial and statically information. Comparison with results for previous periodical
information comparison with results for previous periods may indicate discrepancies which all
for further examination and explanation. Budgetary control and standard costing system will be
additional tools of internal control. These will assist in prevailing material variances which,
intern, could be investigated and statically resolved. Special reviews by top management of
particular items such as stock in trade or the operation of the wages department and other
department of importance constitute another tool of control (Arens, Elder and Beasl, Auditing
and assurance service, 14thEd.).

2.4 Advantage and Techniques of Evaluating Internal Control

2.4.1Advantages of internal control

The existence of an efficient system of internal control can be of great help to the management as
well as to the auditor because it offers the following advantages.

1. Assures a high degree of accuracy and reliability of all the financial and operating
information management linkages.
2. Minimizes occurrence of frauds and errors or any other regularity, if not eliminates
completely.
3. Safeguards assets against any misuse.
4. Promotes operational efficiency and prevent wastage.
5. Judges operating efficiency and high lights weaknesses.
6. Above all, encourages adherence to the established managerial polices.

2.4.2 Techniques for evaluation of internal control system

There are four techniques or methods of evaluating internal controls. These are briefly discussed
below.

a) Deal approach
Oral discussion is held to identify strengths and weaknesses.

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 b) Memorandum approach
Full notes are taken during discussions governing evaluation of internal controls. Analysis of
weakness is under taken and suggestions are offered through management letter for
improvement.

c) Internal control questions (ICQ)

An ICQ consists of questions in respect of each element of business. Answers are obtained as
“yes”, “no”, “not applicable” Remarks column is used for raising questions and for identifying
weaknesses of the existing internal controls with a view to removing these some forms use
improved and expanded version of ICQ. This is known as descriptive system questionnaire
(DSQ)

d) Flow charts
A flow chart is a graphic representation of a system in use. It depicts the various operations,
control measures, and steps included in a system through graphic symbols. Flow chart, therefore,
provided a simple, concise and comprehensive view of what is happening with in the
organization. It explains what is happening with in the organization. It explains what documents
or information are raised, how they are dealt with, what the circulation of casher goods is, what
actions are taken, etc. Flow charts of each business activities are reviled and internal controls are
evaluated. (Rich Hayes and Arnold shoulder with Roger Dassen and Philip wallaga, 1999)

2.5 Internal Audit, Internal Check and Internal control

The expression internal audit, internal check and internal control can be differentiated from one
another in the following manner.

1. Internal audit

Internal audit is an independent appraisal activity in an organization to review the operations and
records as to service for management and is done by specially assigned staff.

2. Internal check

Internal check means a system under which the work relating to carrying out and recording of
transactions is arranged in such a manner that the work of one staff member is automatically

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checked by another. Thus, under this system possibilities of fraud and error or regulates are
minimized if not completely eliminated.

3. Internal control

By internal control it means not only internal check and internal audit but the whole system of
control financial and other wise, established by the management in the conduct of a business in
an orderly manner, safeguard its operations and records.

Thus it is apparent that internal control expression is used include sense and includes internal
check and internal audit besides other forms of control. . (Principles and practice of Auditing 15 th
Edition R.G SAXENA).

2.6 Cash and its composition and Importance

2.6.1 Cash and its composition

Cash is a medium of exchange that a bank will accept for deposit and immediate credit to the
depositor’s account cash include currency and coin, personal check, bank drafts, money orders,
credit card sales drafts, and cashiers’, checks, as well as money on deposit with banks. Items
sometimes confused with cash include postage stamps, postdated and checks.

IAS7 defines cash as notes and coins in hand and deposits in a bank and similar institutions that
are accessible to the business on demand.

Deposit with a trustee, for example, a bond sinking fund that is not under the control of
management of business enterprise, should not be included in cash.

Certificate of deposit generally are clarified as short term investments rather than as cash because
they are not available for immediate with drawl without prior notice to the bank, but the bank
seldom enforce this requirement, consequently, savings deposits usually are viewed as cash petty
cash funds and change funds are minor elements of cash under the control of management, even
though these funds generally are intended to be used for specific purpose. The limitations placed
on the use of these funds do not remove them from the category of cash but simply aid in the
control of cash on hand. (Acfn for non- specialist/peter At rill and Eddie Mc Laney 7th Ed.).

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2.6.2 Importance of cash
After all, cash is just an asset the business needs to help it to function. In that sense, it is no
different from inventories or non-current assets. The reason for the importance of cash is that
people and organizations will not normally accept anything other than cash in settlement of their
claims. If businesses want to employ people, it must pay them in cash. If it wants to buy a new
non- current asset to exploit a business opportunity, the seller of the asset will normally insist on
being paid in cash, probably after a short credit. When a business fail, it is there in ability to find
the cash to pay the amounts owed that really pushes them under. This factors lead to cash being
the pre-eminent business assets. Cash is what analyst tends to watch most carefully when
assessing the ability of a business to survive and or to take advantage of commercial opportunity.
. (Acfn for non-specialist/peter Atrill and Eddie M.C. Laney 7th Ed.)

2.7 Cash Management

The management of cash involves two distinct goals first; a firm establishes a system of internal
controls to ensure that cash is safe guarded from theft or embezzlement. Typical internal control
procedures include the separation of duties of individuals handling cash receipt and
disbursements, depositing cash receipts immediately, disbudding cash only by authorized
cheques, and preparing bank account reconciliations regularly.

Second, management wants to regulate cash balances so that neither too much nor too little cash
is available at any time cash on hand or in checking accounts generally does not earn interest. In
fact, during inflationary periods, idle cash loses purchasing power and thus decreases in real
value. A firm does not want to maintain excessive cash balances. (Pandey, 1999)

2.7.1 Controlling cash receipts and disbursements

The system for controlling cash receipts should be designed to ensure that all money collected
for the firm benefits the firm. In most business, collections are received primarily through the
mail in the form of bank cheques or incurrence for cash sales. The need to control the collections
of currency and coins is obvious. All collections for cash sales should be recorded promptly,
either in a cash register or some other device that both records the receipts and locks in the
amount of the collections. Other kinds of collections are more susceptible to mishandling
because they occur less often.

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These include receipts from the sole of assets not normally intended to be sold, receipts from
dividends and interest on investments, collections on notes receivable, proceeds of bank loans,
and proceeds of share or bond issues.

One way to provide effective controls of cash receipts would be to maintain duplicate sets of
records, each under separate super vision. But doing so would be expensive. The business need
not undertake this expensive control device, however, if it:

1. Designs its cash-handling techniques so that the monthly statement received from its
bank effectively serves as a duplicate record and.
2. Separates the functions of cash handling and record-keeping. To use the bank statement
as effective cash controlling device requires that all receipts be deposited promptly and
all disbursements be made by cheque (Philip R. Olds,2000)

2.7.2 Un-deposited cash

If a firm follows the desire able practice of depositing all receipts infect each day, disbursements
will usually be made only from checking account. A daily record of cash on hand is desirable
cash registers facilitate the accumulation of such cash data cash registers are being increasingly
replaced by combination cash register computer terminals, which are called point-of sale
systems. When such systems are used with bar-code scanners, the sales, cash, and inventory
records are updated automatically at the time of each transactions (Fred Phillips 2006)

2.7.3 Cash in bank-deposits

A deposit slip provided the information for preparing the journal entry to record the deposit of
cash funds in the checking account. The deposit slip should be prepared in duplicate; the bank
keeps the original and the firm keeps the duplicate. The duplicate is often initiated by the bank
teller and used as receipt for the deposit of the funds.

(Philip R. Olds, 2000)

2.7.4 Cash in bank-issuance of cheques

The information for the entry to record cheques drawn in payment of bills comes from the
document authorizing the payment. The customary entry will be a debit to accounts payable and
a credit to cash in Bank

14 | P a g e
 (KC shekhar lekshmy shekhar, 2005)

2.7.5 Control of disbursements by cheque

All payments except for those of very small amounts should be made by cheque. The firm can
there by restrict the authority for payments to a few employees. Firms often provide further
control by requiring that all cheques be signed by two employees. Another control device is the
use of a cash disbursements journal or cheque register in which all cheques issued are recorded.

In any case control over disbursements should ensure that:-

1. Payments are made only by authorized persons.

2. Adequate records support each payment, such records attest that disbursement was for
goods and services produced by proper authority and actually received by the business.
3. The transaction is entered properly in the formal account records.
4. Authorization of payment is separate from making payment, and record keeping is
5. separate from both. (KC Shekhar Lekshmy Shekhar, 2005)

2.7.6 Petty cash

It is inefficient for small payments to be made by cheque small payments may be made by cash
and yet come with in the cheque control system by the use of an impress petty cash fund,
operated as follows.

1. Establishment of the fund: Acheque is prepared for an amount that will provide for
small cash payments for a reasonable time, and is cashed by the petty cash cashier
responsible for the cash.
2. Payments: the establishment of the fund is recorded by debiting petty cash and credited
cash.
3. Replenishment of fund: when the cash in the fund is almost exhausted by payments,
there clients and memos accompanying the request for replenishment the cheque will be
reported as a normal expenditure, with a debit to the appropriate expenses and a credit to
cash. (Philip R. olds, 2000)

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2.7.7 The bank statement
At the end of each month (or other regular intervals), the banks ends a statement together with
the cancelled cheques that have been paid and deducted from the depositor’s account, and
meadows of any other additions or deductions that have been made by the bank. When the bank
statements received, it should be compared promptly with the record of deposits, cheques drawn
and other bank items on the records of the firm.

The two basic causes of the differences are time lag and errors. Cause of such differences
includes cheques outstanding, deposits made just before the bank statement date that have not
been recorded on the firms’ books. The other basic difference is coursed by errors in record
keeping by either the firm of the bank. The process of comparing the bank statement with the
book is known as reconciling the bank account, and the schedule that is prepared to demonstrate
the results of the comparing is called bank reconciliation.

The bank reconciliation is divided in to two major sections one section begins with the balance
according to the bank statement and ends with the adjusted balance; the other section begins with
the balance according to the depositor’s records and also ends with the adjusted balance. (Fred
Phillips 2006)

2.7.8 Preparing the bank reconciliation

The bank reconciliation explains the difference between the book balance of cash in bank and the
bank’s statement of the firm’s cash on deposit. It indicates the required adjustments of the firm’s
accounts. Preparing the bank reconciliation typically involves the following steps.

1. Enter at the top of the reconciliation the balance as shown on the bank statement.
2. Enter next any deposits that have not been recorded on the bank statement.
3. Enter any other adjustments to the bank’s balance, such as errors by the bank in recording
cancelled cheques or deposits, or the return of cheques belonging to some other
customer of the bank.
4. Obtain a sub total
5. List the outstanding checks
6. Deduct the sum of the outstanding cheques from the subtotal obtained instep 4.
7. Enter cash in bank account balance as shown on the books on the banks statement date.

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 8. Add or deduct any errors or omissions that have been disclosed in the process of
9. reveing the items returned by the bank.
10 The net result is the adjusted book balance, and it must correspond to the adjusted bank
balance derived in the first section. (Fred Phillips, 2006)

Adjusting entries from the bank reconciliation

The bank reconciliation shows two distinct kinds of differenced

1. Differences between the balance shown on the bank statement and adjusted bank balance.
2. Difference between the account balance on the firm’s books and adjusted book balance.
Only the second type of difference requires entries on the firm’s books. Any deposit not credited
by the bank will presumably have been recorded by the time the reconciliation is prepared and,
in any event, represent funds that the depositor may assume are in the bank and available for use.

Entries must be made for all of the differences between the cash balance on the books and the
adjusted book balance because they represent errors or omissions. The bank must, of course,
correct any error on its book when the mistake is called to its attention.

(Philip R. Oids, 2000)

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 CHAPTER THREE

3. DATA ANALYSIS AND INTERPRETAION

3.1. Introduction

This section of the study deals with the data analysis and presentation of the collected data. The
data collected has been analyzed and presented using tables and percentage computations.

3.1. Characteristics of respondents

This section presents the data gathered about commercial bank of Ethiopia-Adigrat Main
Branch’s internal control over cash on the basis of questionnaire, some secondary data and its
analysis. Secondary data is used to consolidate the data obtained through questionnaire and to
obtain data not obtained through questionnaire.

The sample sizes of this study are 12 respondents selected from among the total (60) employees
of the branch.

Table 3.1 Characteristics of respondents

S. No Item Alternatives Frequency Percentage

1 Sex Male 9 75%

Female 3 25%

Total 12 100%

2 Age 25-30 (M) 9 75%

25-30 (F) 3 25%

30-40 (M) - -

30-40 (F) - -

Total 12 100%

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 3 Work 0-3 years (M) 7 58.33%
experience
0-3years (F) 3 25%

3-5 years (M) 1 8.33%

3-5 years (F) - -

Above 5 years(M) 1 8.33%

Above 5 years(F) - -

Total 12 100%

4 Educational Diploma (M) - -

qualification
Diploma (F) - -

Frist degree (M) 7 58.33%

Frist degree (F) 3 25%

Masters(M) 2 16.7%

Masters (F) - -

Other (M) - -

Other (F) - -

Total 12 100%

Source: questionnaire 2015

As it can be under stood from the above table most of the respondents (75%) are male. The same
tables also reveal that the age of 100% of the employees is “between” 25-30. The work
experience of 83.33% of the respondents is from 0-3 years. The rest 16.7% of the respondents
have work experience 3-5 years and above 5 years respectively. The most of respondents
(83.33%) are first degree holders the rest 16.7% being master holders.

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One thing that can be generalized from the above analysis is that most of the workers have no
long years of experience.

3.2. Internal control over cash receipts

The function of receiving cash from customers and keeping its safety requires a well-designed
control over cash receipts. Cash, because, is the most liquid asset that can be misappropriated
and embezzled easily.

Internal control over cash receipts is achieved through.

 Segregation of duties related to cash receiving transactions.

 Using cash short and over accounts for differences.
 Examining the legality of notes while receiving etc.
In line with this, the researcher has raised the following questions so as to investigate the internal
control over cash receipts of CBE Adigrat main branch.

Table 3.2 Analysis of questionnaire related to cash receipts

S. Item Alternatives Frequency Percentage
No

1 Is authorization of cash receipts separate from Yes 12 100%

receiving cash, and is recording keeping
No - -
separate from both?

Total 12 100%

2 Are cash short and over accounts used for Yes 9 75%
difference between receipts and actual
No 3 25%
receipts?

Total 12 100%

3 Does the bank provide cash indemnity Yes 11 91.6%

allowance to tellers so as to cover loss occurred

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 to a predetermined amount? No 1 8.4%

Total 12 100%

4 Are the deposit tickets compared with the cash Yes 12 100%
receipts journal at the end of the day’s
No -
operation?

Total 12 100%

5 Is anybody allowed to enter the cash area and Yes 4 33.33%

the cabin of the teller at any time?
No 8 66.7%

Total 12 100%

Source: data collected through questionnaires 2015

3.2.1 Segregation of Duties related to cash receiving transactions

According to table 3.2 items 1, all the respondents (100%) have replied that authorization of cash
receipts is separate from receiving cash and record keeping is also separate from receiving cash
and record keeping is also separate from both. Ad hence there is effective, segregation of duties
with respect to cash receiving transactions which is the essential element of internal control.

3.2.2. Cash differences and Indemnity allowance

According to table 3.2 item 2, most of the respondents (75%) have replied that cash short and
over accounts are used for differences between receipts and actual receipts 25% of the
respondents replied no. According to table 3.2 Item 3, most of the respondents (91.6%) have
replied that the bank provides cash indemnity allowance to tellers so as to cover loss occurred to
a predetermined amount. 8.4% of the respondent replied no. This allowance can Reduces

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turnover of employees (since it is a guarantee), Motivates tellers to work carefully and diligently
and it is like insurance to tellers.

3.2.3Comparison of the deposit tickets with the cash receipts journal

According to table 3.2.item 4, all the respondents (100%) have replied that the deposit tickets are
compared with the cash receipts journal at the end of the day’s operation. This comparison is
necessary to establish the accuracy of the cash balance with the balance recorded by the journal
keeper. It is used to discover discrepancy if any

3.2.4Cash area
According to table 3.2 item 5, most of the respondents (66.7%) have replied that anybody is not
allowed to inter the cash area and the cabin of the teller at any time. The rest respondents
(33.33%) have replied the reverse.

Since the cash work requires care and accuracy, noting to disrupt the attention of the tellers
should be table rated. This plays great role in reducing cash discrepancies that might result from
such disturbance.

3.2.5 Handling or keeping received (deposited cash safety)

Handling or properly keeping received cash from customers is one of the functions related to
cash receiving transactions. This achieved through.

 Separating handling of cash from receiving.

 Conducting surprise cash counts by responsible person.
 Exercising effective control over the cash lodged to the vault, etc.
It line with this the researcher has raised the following questions so as to investigate the cash
handling or keeping mechanism of CBE- Adigrat main branch.

Table 3.3 Analysis of questionnaire related to keeping deposited Cash

S. No Item Alternatives Frequency Percentage

1 Is the cash lodged to the vault kept Yes 11 91.7%

under the dual control of the branch
No 1 8.33%
cashier and the branch manager or

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 his/her designate at all times?

Total 12 100%

2 Are separate keys given for the branch Yes 10 83.33%

manager and for the chief cashier to be
No 2 16.7%
used in closing and opening the safe
vault?

Total 12 100%

3 Are surprises cash accounts made by a Yes 11 91.7%

responsible person?
No 1 8.33%

Total 12 100%

4 Are duplicate keys of the safe vault kept Yes 4 33.33%

in the hands of the controller only?
No 8 66.7%

Total 12 100%

5 Is recording of cash receipts separate Yes 11 91.7%

from handling of cash?
No 1 8.33%

Total 12 100%

Source: data collected from questionnaire 2015

3.1.5.1 Lodging cash in to the safe vault

According to table 3.3 items 1, most of the respondents (91.7%) have replied that the cash
lodged to the vault kept under the dual control of the branch cashier and the branch manager or

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his/her designate at all times. The rest of the respondents (8.33%) replied the reverse. From this
it is apparent that the branch manager and the branch cashier might conspire to commit fraud.

3.1.5.2 The safe vault

According to table 3.3 item 2, most of the respondents (83.33%) have replied that separate key
are given for the branch manager and for the chief cashier to be used in closing and opening the
safe vault. The rest of the respondents (16.7%) replied the reverse.

Again it is possible for the branch manager and the cashier to conspire and commit fraud such
collusion can significantly impair the effectiveness of a system because it eliminates the
protection anticipated from segregation duties.

3.1.5.3 Surprise cash count

According to table 3.3 Item 3, majority of the respondents (91.7%) have replied that surprise
cash count, are not made by a responsible persons. The rest of the respondents (8.33%) replied
the reverse. From this it is logical to say that the bank doesn’t undergo effective control over its
various funds.

According to table 3.3 Item 4, a few of the respondents (33.33%) have replied that duplicate days
of the safe vault kept are in the hands of the controller only. The rest of the respondents (66.7%)
replied the reverse. According to table 3.3 item 5 most of the respondents (91.7%) have replied
that the recordings of cash receipts are separate from handling of cash. The rest of the
respondents (8.33%) replied the reverse. And hence, I can conclude there is effective segregation
of duties with respect to this transaction.

3.3. Internal control over cash payments

The function of paying cash to customers requires an affective internal control.

Internal control over cash payments are more effective when payments are made by check rather
than on cash except for incidental item that are paid out of the petty cash. Effective control over
cash payments is supposed to include the following among other things.

 Segregation of duties related to cash payment transactions.

 Using pre numbered checks.
 Using the petty cash system.

24 | P a g e
  Stamping paid invoices, etc.
In line with this the researcher has raised the following questions as investigate the internal
controls for cash payments of CBE- Adigrat main Branch.

Table 3.3 Analysis of questionnaire related to cash payments

S. No Item Alternatives Frequency Percentage

1 Is authorization of cash payment Yes 10 83.33%

separate form making payment and is
No 2 16.7%
record keeping separate from both?

Total 12 100%

2 Are all cash payments, small or large, Yes 9 75%

made by check?
No 3 25%

Total 12 100%

3 Is the petty cash system used in the Yes 12 100%

bank?
No - -

Total 12 100%

4 Are checks signed after they are Yes 12 100%

prepared?
No - -

Total 12 100%

5 Are all checks are pre numbered? Yes 11 91.7%

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 No 1 8.33%

Total 12 100%

6 Are vouchers and supporting documents Yes 11 91.7%

stamped paid?
No 1 8.33%

Total 12 100%

7 Does a person who signs checks Yes 11 91.7%

approve cash payment and record cash
No 1 8.33%
payment?

Total 12 100%

Source: data collected through questionnaire 2015

3.3.1 Segregation of duties related to cash payment

According to table 3.4 items 1, most of the respondents (83.33%) have replied that authorization
of cash payments are separate from making payment and record keeping is also separate from
both. The rest of the respondents (16.7%) replied the reverse. A good internal control with
respect to payment is one that clearly separate duties of authorization of payment, from making
payment and record keeping from both. But in another way, nobody should be allowed to
authorize, pay and record transduction. And hence, from the above I can conclude that there is
segregation of duties with respect to payment.

According to table 3.4 item 2, most of the respondents (75%) have replied that all cash
payments, except for small amounts, are made by check. The rest of the respondents (25%)
replied reverse.

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As it is well known that a cash payment is effective when it is made by check except of small or
large amounts because it is not cost effective to issues checks for small amounts. Therefore, the
bank effects large amount payments through checks.

3.3.2 The petty cash system

As it has been described in the above section it is not cost effective to issue check for small
amounts. It is, rather, cost effective to pay small payments on cash from a fund established for
such purpose. Such funds are called petty cash fund. Now, according to table 3.4 item 3, all of
the respondents (100%) have replied that the petty cash system is used in the bank.

And hence, CBE- AMB uses the petty cash system. The practical application of petty cash fund
takes the following entry.

a) At the time of establishment

Petty cash…………………………………xx

Cash in bank……………………………xx

b) When payment is affected

Expenses………………………………….xx

Petty cash……………………………….xx

C)At the time of replenishment

Petty cash…………………………………xx

Cash in bank…………………………..xx

(Sources cash procedure manual)

3.3.3 Effecting payment through checks

A check is a written instrument signed by the depositor, ordering the bank to pay a certain sum
of money to the order of a designated person. Checks are negotiable instruments that make large
amount payments effective.

Normally, the content of check payment voucher includes; date of transaction and reference
number, the name of the payee, signature of the payee, a place to record accounts code, a place to
27 | P a g e
debit and credit amount, prepared by – senior accountant, approved by – finance department
head and authorized by – general manager.

Now as to table 3.4 items 4, all of the respondents (100%) have replied that checks are signed
after they are prepared. This helps to govern the legal relationship between the drawee and the
drawer.

According to table 3.4 item 5, most of the respondents (91.7%) replied that checks are pre
numbered and the rest of respondents(8.33%) are responded reverse. This is a good practice by
the bank since it facilitates internal control over cash from both the depositor side and the bank
side. It helps to control unrecorded and outstanding checks.

3.3.4 The voucher system

As table 3.4 items 6, most of the respondents (91.7%) replied that vouchers and supporting
documents are stamped “paid”. The rest of the respondent (8.33%) replied the reverse. As table
3.4 item 7 indicates that about 91.7% of respondents are responses that

Only the person who signs checks approves cash payments and record cash payment and the rest
8.33% respondents are response reversely.

3.4. Controlling cash through bank accounts

This is a mechanism whereby use bank reconciliation and cash proof to control receipts and
disbursements among branches and to establish the accuracy of cash as well.

The researcher has raised the following questions so as to investigate the practice of bank
reconciliation and cash proof of the bank.

Table 3.4 Analysis of questionnaire related to controlling cash through bank accounts

S. No Item Alternatives Frequency Percentage

1 Is proof of cash practiced Yes 12 100%

in the bank?
No - -

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 Total 12 100%

2 Is bank reconciliation done Yes 12 100%

at the time?
No - -

Total 12 100%

3 Is banker conciliation done Yes 12 100%

monthly?
No - -

Total 12 100%

Source: data collected through questionnaire 2015

3.4.1 Bank reconciliation

According to table 3.4 items 2, all of the respondents (100%) have replied that bank
reconciliation done at the time. Bank reconciliation is the process of bringing the cash balance
indicated in a bank statement in agreement with that of the depositor’s ledger account for cash.
According to table 3.5 item 3, all respondents (100%) replied that bank reconciliation is done
monthly in their organizations.

3.4.2 Cash proof

According to table 3.4 item 1, all of the respondents (100%) have replied that proof cash is
practiced in the bank. So proof cash is practiced

According the account of CBE-AMB cash proof is made:

 To conduct full reconciliation of cash receipt and payments,

 To establish the accuracy of cash balance, and
 To ascertain the effectiveness of internal controls over cash receipts and payments.

29 | P a g e
 CHAPTER FOUR

4. CONCLUSIONS AND RECOMMENDATIONS

4.1 Conclusions
One of the key elements in ensuring business success is to build a strong and efficient internal
control structure of cash. As cash is the most liquid of all assets and offers the greatest
temptation for theft, embezzlement, and miss up appropriations the process of fostering effective

30 | P a g e
and a fairly adequate internal control over cash should not be over looked especially in the
banking venture.

In general emanating from the study, I would like to draw the following conclusions.

A) Strengths

 Most of the workers have first degree levels and masters. So highly professional
employees, particularly in the banking industry are vital since they are lubricant to the
work.

 There is effective internal control for deliberately manipulated cash shortage created by
the teller for the sake of obtaining benefits from the cash indemnity account.
 The research reveals that there is effective segregation of duties with respect to cash
receiving and cash paying transactions. According to the results of the study no single
individuals is allowed to:
 Authorize cash receiving
 Receive cash and
 Record cash receipts
The same thing holds true for cash payment transactions. That is no single person is allowed to:

 Authorize cash payment.

 Make payment and
 Record cash payment
 The bank uses different techniques to consolidate its internal over cash the techniques
related to cash receiving transactions are:

- Using cash short and over accounts,

- Paying due attention to discover forged notes if found while receiving cash,

- Comparing the deposit tickets with the cash receipts journal,

- Controlling the cash area from things that disturb the attention of the tellers,
etc.

31 | P a g e
And techniques related to the cash payment transactions are:

 Using petty cash system

 Segregation duties related to:
- Signing checks,

- Approving cash payments and

- Recording cash payments

 The research also has proved that bank reconciliation is made on a regular basis. This
leads to minimize errors to remain undetected for long time. This in turn hampers bank
reconciliation not to be used as a means of controlling cash.
b) Weaknesses

 The result of this study indicated that the branch manager and chief cashier use separate keys
for closing and opening of the safe vault. But it is possible for the branch manager and
the cashier to conspire and commit fraud. Such collusion can significantly impair the
effectiveness of a system because it eliminates the protection anticipated from
segregation of duties.

 The banks do not have an experienced employee who works much longer in the banks.
Hence, the experiences of the employees are very vital to the bank in order to process
the work effectively it will needs so much experienced workers to control over cash.

 Surprise cash counts are not made by a responsible person. This in turn impairs the
internal control designed to assure the accuracy of the cash balance on hand.
In general, it can be said that the existing internal control over cash is somehow adequate in
terms of achieving the objectives set by the bank. On the other hand, the internal control is being
hampered by the deficiencies articulated above.

4.2 Recommendation
The following recommendations are made on the basis of the research findings and literatures
reviewed.

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 The controller must exercise surprise cash count. In order to make internal
control adequate, surprise count of cash must give a high priority.
 To assess the internal control over cash the bank should have to process the
works by very experienced workers or employees.
 Bank reconciliation should be done on a regular basis either weekly or monthly.
This helps to prevent errors not to occur due time lag.
 The bank should avoid reliance on one individual. It should not delegate
significant authority to one person to establish, impellent, monitor and enforce
any single function of the bank. Cognizant of the fact that collusion is one of the
limitations of internal control, rotating of workers should be considered.

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Bibliography

Johannu Kinfu and Engida Boyou, (2009) Introduction to audit and practice Addis Ababa
(Ethiopia)

Alvin A. Arens, Randels j. Elder and Marks s. Beasely, auditing and assurance services 5 th
edition.

Whittington/pany principle of Auditing and other Assurance services 19th edition.

Peter Atrill and Eddie Mc laney Accounting and finance for non specialist 7th edition.

Chris Hogan Auditing and Assurance service 15th edition s

Rich Hayes and Arnold children with Roger Dassen and Philip wallage, (1999) principle of
auditing an international perspective in London.

Ron Weber, (1988) EDP Auditing New Delhi printed in India

KC Shekhar, Lekshemy Shekhar, (2005) 19th Ed. Banking theory and practice vikas publish in
House.

Pandey, (1999) 8th Ed.) Fundamental Financial ManagementFloridaInternationalUniversity of

FloridaUSA.

Philip R. Olds (2000) 3rd Ed. Fundamental Financial Accounting Concepts USA

Fred Phillips, (2006) Fundamental Financial AccountingUniversity of Saskatchewan

Sources cash procedure annual (2012)

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 APPENDIX

ADIGRAT UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

THIS QUESTIONNAIRE IS PREPARED FOR MANGER AND EMPLOYEES OF COMMERCIAL

BANK OF ETHIOPIA ADIGRAT MAIN BRANCH.

Dear Respondent!

You are kindly requested to complete these questionnaires honesty all information you provide
will kept stricken confidentiality and will not be used for any other purpose except for the
academic research.

The questionnaires are to identity some problems that will be improved for Internal Control
over cash in CBE Adigrat main Branch. So that, your response kept very confidential and you
don’t required to mention you name and finally thank you in advance for your cooperation.

The reason of this question is to collect primary data on the Internal Control over cash in CBE
Adigrat main Branch.

 Tick () appropriate boxes as applicable to you and fill the relevant information as well.
 This question is answered by only the manager and employees.
I. Personal Information
1. Sex:
A. male
B. Female
2. Age:
A. 25-30
B. 30-40
3. Education :

viii | P a g e
A. Diploma
B. 1st Degree
C. Masters
D. Other
4. Working experience in the banking industry?
A. Between 0-3years
B. Between3-5 years
C. Above5 years
II. Research Questions

1. Is authorization of cash payment separate from making payment, and is record keeping
separate from both?
Yes No

2. Is authorization of case receipts separate from receiving cash and is record keeping
from both?
Yes No

3. Are the deposit tickets compared with cash receipt journal at the end of the day’s
operation? Yes No
4. Are all cash payment, small or large amounts, made by check?
Yes No

5. Is the petty cash system used in the bank?

Yes No

6. Are surprises cash counts made by a responsible person?

Yes No

7. Is proof of cash practiced in the bank?

Yes No

8. Is recording of cash receipt separate from handling of cash?

ix | P a g e
 Yes No

9. Are cash short and over accounts used for difference between receipts and actual
receipts?
Yes No

10. Is bank reconciliation done at the right time?

Yes No

11. Is bank reconciliation done monthly?

Yes No

12. Is the cash lodged to the vault kept under the dual control of the branch cashier and the
branch manager or his/her designate at all times?
Yes No

13. Are separate keys given for the branch manager and the chief cashier to be used in
closing and opening the safe vault?

Yes No

14. Are duplicate keys of the safe vault kept in the hands of the controller only?
Yes No

15. Does the bank provide cash indemnity allowance to tellers so as to cover loss occurred
to a predetermined amount?
Yes No

16. Are all checks are numbered?

Yes No

17. Does a person who sings checks approve cash payment and record cash payment?
Yes No

18. Are vouchers and supporting documents stamped paid?

x|Page
 Yes No

19. Are check signed after they are prepared?

Yes No

20. Is anybody allowed to enter the cash area and the cabin of the teller at any time?
Yes No

Thank for your co-operation!!

Contact Address 0917688975

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