internal control for petty cash(new)

SaSa Fashion Company

*Internal Control For Petty Cash

LECTURER: CHHUN RADYGROUP 7

Economics and Finance Institute

I. Introduction

*Introduction

*The three primary objectives of effective

internal control:

*Reliability of financial reporting

*Efficiency and effectiveness of operations

*Compliance with laws and regulations

* Introduction

*The method use:

*Narrative

*Flow chart

*Internal control questionnaire

II. Policy and Procedures

1. Introduction

Petty Cash Policy and Procedures document:

is issued on 1st August 2009

supersedes all other policies and procedures relating to petty cash currently in issue

is applicable to all employees of the company

Petty cash claims will not be reimbursed to self-employed persons

2. Policy

Petty Cash may be used to reimburse for small

items of incidental expenditure only

The maximum amount that may be claimed is

$500

2. Policy

The following items cannot be reimbursed via

petty cash:

• Travel and subsistence

• Hospitality or entertaining

• Uniforms

• Telephone costs

• Equipment

3. Procedure

Petty cash fund

• The Manager should often review

the amount in the fund to ensure

that the amount is adequate

• The money should be kept in a

locked petty cash box under the

control of the Petty Cashier

The working flow in the company is listed below:

3. Procedure

Petty cash expenses

• Petty cash expenses must be related

to legitimate company activities

• The maximum limit for petty cash

expenses is $500. Expenses over this

amount must be paid by cheque

• Casual wages are not paid out of the

petty cash fund

3. Procedure

Employees:

• Keep all dockets and/or receipts for

petty cash expenses as proof of

payment

• Attach dockets and/or receipts to the

back of the Petty Cash Voucher

• Check at the point of purchase that

dockets/receipts are clear and correct

Documentation required

3. Procedure

Employees:

• Complete a Petty Cash Voucher

• Attach relevant dockets/receipts to

the back of the Petty Cash Voucher

• Obtain the supervisor’s authorization

for amounts over $350

Claims process

3. Procedure

Claims process

• Submit all claims to the Petty

Cashier within seven (7) working

days

Petty Cashier:

• Check the claim and reimburse the

employee from the petty cash fund

for the amount spent within two (2)

days of the claim

3. Procedure

Petty cash advancesEmployees:• Complete a Petty Cash Voucher if money is needed, in advance, to pay a company-related expense• Get the Manager’s approval for the advance• Give the Petty Cashier a docket/receipt for the money spent, as well as any change from the advance, within five (5) working days of receiving the money

3. Procedure Security

Petty Cashier:

o Keep the petty cash fund secure by:

• not allowing other persons access to the petty

cash box

• locking the petty cash box when it is not being

used

• putting the petty cash box in a locked desk

drawer during working hours

3. Procedure

Security

Petty Cashier:

• putting the petty cash box in a safe place

overnight

o Do not issue funds from the petty cash fund

unless a Petty Cash Voucher has been

processed, in accordance with the above

guidelines

3. Procedure

Petty cash expenses

Petty Cashier:

• Check all Petty Cash Vouchers against

dockets/receipts for accuracy

• Check that all claims are related to the

company’s business

3. Procedure

Petty cash expenses

Petty Cashier:

• Check that all claims over $350 have been

authorised by the employee’s supervisor

• Pay approved petty cash claims promptly and

accurately

3. Procedure

Petty cash expenses

Petty Cashier:

• Keep all Petty Cash Vouchers in the petty

cash box until recorded

3. Procedure

Petty cash advances

Petty Cashier:

• Check that all petty cash advances

are authorized

• Pay out petty cash advances

• Follow up petty cash advances if the

docket/receipt for the expense is not

submitted within five (5) working

days

3. Procedure

Petty Cash Book

Petty Cashier:

• Record all Petty Cash Vouchers in the Petty

Cash Book at least weekly

• Balance the Petty Cash Book fortnightly or when

funds are running low

• Check the balance in the Petty Cash Book

against the amount remaining in the petty cash

box

3. Procedure

Petty Cash Book

Petty Cashier:

• Submit the Petty Cash Book and Petty

Cash Vouchers to the Authorised Officer

fortnightly and advise of any problems

• Advise the Authorised Officer of how

much money is required to reimburse

the fund

3. Procedure

Petty Cash Book

Petty Cashier:

• Advise the Authorised Officer when the amount

in the petty cash fund needs to be increased

*IntroductionEffective internal control = Design and operate the policies and the

procedures effectively

Defi ciency and type of control activities

Deficiency Type of control activities should be

strengthenOn last day of January, a copy purchase office supply receipt was use to reimburse petty cash from petty cashier.

Adequate documents and records

Accountant, did the petty cash fund requesting instead of petty cashier who are responsible in preparing this requesting to petty cash coordinator.

Proper authorization of transaction and activities.

On the surprise cash control of petty cash fund, the financial manager find the wrong amount between the remaining cash and the record-balanced because the petty cashier recorded the wrong number of one receipt payment.

Physical control over assets and record

A Voucher that reimbursed to employee on the last day of February was signed by financial officer.

Proper authorization of transaction and activities.

Petty cashier confused to reimburse twice to one receipt in March 23rd.


Due to the short of petty cash, financial officer agree to the requesting $400 from petty cashier. But the remaining of petty cash at that time was $168. So, the petty cash will be up to $568.


Independent checks on performance

One receipt was found that an expense item was English Grammar Book, not involve with the company operation. As a result, one staff used petty cash for his personal expense.

Independent checks on performance

Adequate documents & records

*IV. Comments

*Require original receipts in order to disburse petty cash. Maintain the receipts in the petty cash fund box for reconciling.

*The person to be reimbursed should indicate on the original receipt what was purchased, the business purpose, and account and fund to be charged.

*IV. Comments (con’t)

*The original receipts should be approved and

signed by an appropriate authorized individual.

*The petty cash fund should not be used for

personal benefit.

*The Manager is responsible for regularly

reconciling the petty cash fund


*A petty cash fund remains open on the records

of the Accounting Services Department until you

request it be closed. The Accounting Services

Department performs an annual written

confirmation of the petty cash account balances.


*Decide if you really need a petty cash fund. If

not, contact the Accounting Services Department

to close the fund.

*Provide the enough documents and reasons for

the shortage of petty cash fund.


*Return the petty cash fund to the financial

official in case that the reimbursement amount is

over the petty cash set ($500).

*The petty cashier should be more independent

on his or her obligation.

V. References

*Ms. Chea Yana, Manager of Lux Fashion Company

Email: [email protected]

Tel: 012 348 999

* Auditing and Assurance Services, Prof. Elder/ Beasley/ Arens, 12th Edition, Publish in 2008

mailto:[email protected]

*Thanks for Your

Attention!

internal control for petty cash(new)

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