AUDITING & ASSURANCE PRINCIPLES For recitation

and discussion
INTERNAL CONTROL ON PETTY CASH No. 1 is given as an Example

INTERNAL CONTROL No. STATE at least ONE REASON - WHY

General policies
The imprest fund method should be used 1. (1) To limit the amount of cash in the fund
(2) Easy to check

The amount of the fund should be resricted to 2. To prevent excessive amount of fund
a minimum amount for reimbursement at relative short For periodic check on disbursements from the fund
period of time

Maximun figures for individual payments against 3. To ensure that only petty disbursements are made
the fund must be set as a policy out of the fund

Custodian of the fund

Responsibility of the fund should be vested in 4. So that the blame for irregularities cannot be
one person passed on to other parties

The custodian of the fund should not have access 5. To prevent substitution to cover up cash
to cash receipts shortage

The custodian of the fund should not have access 6. Accounting records may be altered to cover
to general accounting records irregularities

Petty cash vouchers

Petty cash vouchers should be required for each 7. To provide evidence supporting disbursements
fund disbursement To dischare custodian of his responsibility

Vouchers should be executed in ink (or type- 8. To make alterations or changes difficult
written) and the figures spelled out in words

Vouchers should be approved by a responsible 9. To control expenditures

official before payment

Vouchers and supporting documents should be 10. To ensure that disbursements are proper
checked at the time of replenishment by a
responsible official

Reimbursement/replenishment 11. To fix responsibilty for proceeds of the reimb check

Checks for reimbursement/replenishment To discourage presentation of fictitous vouchers
should be made out of to the order of the PCC for reimbursement

Upon reimbursement/replenishment, PCVs and 12. To prevent fraudulent re-submission of petty

supporting documents should be marked or cash vouchers
cancelled (paid)

Other control measures on petty cash

Cashing of personal checks from the fund should 13. This practice could be use to cover irregularities
be prohibited

Advances out of the fund should be discouraged 14. This practice could be use to cover irregularities
or prohibited

Surprise counts ahould be conducted from time 15. To serve as deterrent against irregularities
to time by an internal auditor or other responsible
official
Cash receipts:
Cash receipts received in person
Cash sales should be supported with invoices
Cash sales proofs should be compared with the
detail of the bank deposit slips by a person who
does not receive or deposit the cash
Official receipts, sales invoices and other forms
should be serially numbered by the printer and
kept in safe custody
Unused forms should be checked regularly and
all accounted for
Cancelled receipts should be checked regularly
including the original copies of those cancelled
The numerical sequence of forms should be
checked independently by the accounting
department
16. To serve as proof of cash collections
17. To ascertain that all cash received were actually
deposited
18. Serial numbering serves as deterrent against
irregularitie
19. Unused forms may be lost and presented to
aid lapping activities although there is no actual
collections
20. Cancelled receipts can be re-used for
lapping activities
21. The numerical sequence of the OR served as
deterrent against irregularity
Provides aid in auditing