Audit Objective
The main objective of the audit is to assess the adequacy and effectiveness of internal controls over cash management.
Potential risks in the internal controls of cash management
1. Certain salaries are paid by cash
2. There is no authorization for cash paid out to sister unit of the head office
3. Handover of cash
4. Improper use of cash – used to disburse personal expense for housekeeping for management
Audit methodologies
• Review of policies, procedures and other relevant instructions, interviews with key personnel and review of pertinent records.
• Audit should likely cover cash transactions including handling, custodianship, and access of cash.
Potential risks to be aware of/ Actions to nullify those risk
• Commingled: When petty cash balance is mixed with the custodians personal funds.
• Surprise cash counts should be conducted to ensure that there is no fraud or theft.
• Supporting documentation: All cash disbursement must be supported by appropriate vendor invoices or receipts.
• Handover of cash: Handover of cash responsibility ensures that the funds are available for operations in the absence of the custodian.
• Segregation of duties: if there is a lack of personnel to segregate the duties then it is recommended that stronger supervisory control must be exercised.
• Access to the cash vault/safe: It would be advisable to keep a log of the times the vault is being accessed by someone else.
• Improper use of petty cash:
o Petty cash is to be used to disburse small amounts of non recurring payments only. Therefore the wages paid out in cash ought to have a separate fund set up for their disbursement in case they require immediate payments.
o The expense of a personal nature may only be allowed under the circumstances that the director or authority figure maintains a permanent residence elsewhere and only requires housekeeping services for a short while in the occasion he is visiting the head office.
General Suggestions:
We could maintain a status of audit recommendations to see what actions are being taken and then it would be more helpful to point out to the management that we have not yet received response for earlier recommendations.
