Cash Disbursements: Case Study

Scenario E4-5
A) List the weaknesses in internal control over cash disbursements.
1) Checks are not pre-numbered. When checks have no numbers, no one will know if a check is misplaced or stolen.
2) Too many people are authorized to sign checks. The treasurer should be the only person authorized.
3) Checks are not being kept in a safe area. A filing cabinet, even a locked one can be easily pried open and checks stolen.
4) Segregation of duties is not being done, the purchasing agent should not be paying the bills if he is ordering, receiving, and paying for these items.
5) There is a lack of documentation procedures. The treasurer pays all other bills after approval from authorized employees, there should be some documentation procedures
o Physical, Mechanical and Electronic controls: All checks will be stored in a safe with access given to the bookkeeper and treasurer. The checks should be printed or written with indelible ink.
Scenario P4-1A
A) Identify the internal control principles and their application to cash disbursements of Guard Dog Company

 Documentation Procedures: Changed from having unnumbered and manually prepared checks to the company using prenumbered checks and a checkwriter purchased by the company.
 Segregation of Duties: Different individuals have been assigned to handle verification of invoice and received goods.
 Establishment of Responsibility: Only the treasurer and assistant treasurer are allowed to sign the checks.
 Other controls: The signer of the check will stamp invoice paid along with the date, check number, and amount of the check.
 Independent Internal Verification: The paid invoice is sent to accounting for recording.
 Physical, Mechanical and Electronic Controls: Blank checks are kept in a safe in the treasurer’s office with only two people having the
Once the count is made, the ushers put the cash in the safe. Ushers serve for a total of 3 months, which means a number of people could potentially have the combination to the safe.
 The financial secretary opens the safe and counts the offerings. She withholds money for the following week but no documentation. If this is petty cash proper, record keeping needs to be done. Having church members make their checks out to cash could potentially lead to people cashing the checks fraudulently.
 The bank secretary deposits the checks and reconciles the statement. Someone else should be involved with this.

B) List the improvements in internal control procedures that you plan to make at the next meeting of the audit team for (1) the ushers, (2) the head usher, (3) the financial secretary, and (4) the finance committee.

1. All the ushers need to go to the basement together and the usher should count his plate with the head usher. Cash and check should total each plate.
2. The head usher and another member of the finance committee should sign off on the total amount collected. Ushers will no longer have access to the safe due to