Acc220 Internal Cash Control

Internal Cash Control

Rose Lowe


October 23, 2010

Anton Narinskiy

    The scenario for the Idaho Company‚Äôs checking account is a grim one.   The principals of internal cash controls that have been violated are segregation of duties, establishment of responsibility, independent internal verification, and physical controls.   With these violations, there is a possibility monies are misused.
    There are several suggestions to improve the deficiencies for the Idaho Company.   First, checks need to be numbered sequentially.   Without numbered checks, the ability to track all outstanding or missing checks is impossible, making bank reconciliations a nightmare to balance. I would recommend a system with check writing abilities therefore, no paper checks are sitting around an office and all checks can be tracked.   Secondly, unissued checks need to be stored in a safe or other means of security.   Right now, they are in an unlocked file cabinet, this just begs someone to steal them.   These minor changes can be corrected quickly.
    The other changes needed to insure internal cash control calls for procedure changes within the company.   The purchasing agent should not be writing checks.   There is too much room for theft, the purchasing agent should only be responsible for purchasing inventory.   It is possible for the purchasing agent to create a fake invoice, pay the invoice, and pocket the money.   The purchasing agent should not be recording the payments in the cash disbursements journal; another employee should conduct this task.   The only person to write checks should be the company treasurer however, other employees should be preparing the invoices for payment, marking paid on the invoice, filing the invoices, making the check entries in the cash disbursements journal, and doing the bank reconciliation; the treasure should not be performing these tasks. With these changes in place, there are better check and balances to assure no theft occurs, or...