Discuss about the Audit for Business Academy Review.
The athletic department manages their deposits to business office and then reconcile all the revenues from the sales of the tickets and all these activities are managed by the office manager only. The company make their deposits on monthly basis and generally it includes more than $ 2,000 under checks and the receipts related to credit cards.
Purpose of the audit
Generally, the check and cash receipts are most of the time subject to the misappropriation if proper control is not followed. Further, as the checks include the bank information and name best practice must be maintained for the purpose of reconciliation. The cash audit will be carried out to ensure that the cash has been properly named and categorized at the time of preparing the financial statement. Further, it will assure that the cash balances and the cash deposits are reconciled properly with regard to the dates that are reported under the financial statement. The audit will further assist in verifying and obtaining mathematical accuracy of the cash related transactions through tracing the opening as well as the closing balances. Moreover, the audit will assist in recognizing the errors related to deposits, withdrawals, overstatement or understatement of cash. To assure that the records reveal the expenses and receipts of cash mentioned in the balance sheet, the auditor shall analyse the cash disbursement and receipts for the specific period prior to the financial statement.
Scope of the audit
The scope of cash receipt audit was to identify the receipt of cash operation procedure and the associated records of the organization. The audit will be carried out as per the Auditing standards issued by the Comptroller general and government of the country and will include various tests related to the records and will include such other procedures of auditing as the auditor will feel necessary under the circumstances. To fulfil the requirement of audit, the auditors will examine the cash related records of the department and the activities during the year of 2016. Full detail of management’s plan, procedures and policies will be obtained by the auditor. Moreover, the auditor will scrutinize the internal control procedure with regard to the operations related to receipt of cash and recording of the revenues. As the office manage is solely answerable for all the cash related deposits and revenue from the sales of receipts, he will be asked to provide all the required details of audit. Further, the branch offices will be visited to confirm the daily collection, deposits, handling and recording of cash related transactions.
Statement of condition
Various loopholes were recognized regarding the cash receipts, deposits and reconciliation of the revenues. It was found that the office manager alone is solely responsible for the preparation of transmittals of deposits to business office and reconciliation of revenue received for sale of event tickets. Further, the deposits are made on monthly basis and generally include receipt from credit card and more than $ 2000 in checks. Another issue was that the events are generally reconciled in two months period which is considered as quite a long time for the purpose of reconciliation. Finally, the major issue found was that the received monies are kept in the office manager’s desk keeping it in the manila envelopes till it is deposited in the bank. Moreover, during audit the auditor found shortage of cash amounted to $ 1,000.
Conclusion and recommendation
From the above discussion it is concluded that various issues are there with the company with regard to receipt, deposits and reconciliation of cash and revenue that may lead to fraud, misstatement or embezzlement of cash. Looking into the circumstances, the following measures are recommended –
- Segregation of duties – as the office manager is solely responsible for al the cash related transactions, there is a high chance of misstatement, whether intentionally or unintentionally. Separating the duties among 3 -4 employees will make it difficult to conceal the fraudulent transactions.
- Access – all the employees responsible for the cash transactions shall be provided with proper training before handling the cash. The process shall be documented in writing and must be handed over to the employees before assigning the job.
- Documentation – when the payment will be received, the responsible person shall record it immediately in the cash receipt register along with the details like date, amount and payer. The transaction number shall be unique and shall be matched at the time of reconciliation
- Reconciliation – the reconciliation process shall be carried out at least twice in a month instead of delaying it for two months as with times the discrepancies may disappear and make it difficult to identify.
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