Cash Management Matrix
Directions: Using the matrix, list how each of the principles of internal control works, and give an example for each. Next, list how each of the principles of cash management works, and give an example for each.
Principles of Internal Control| How it Works| Example|
Establishment of responsibility| An assignment of responsibility to specific individuals. Includes the authorization and approval of transactions.| Designated personnel who are authorized to handle cash receipts.| Segregation of duties| Segregation of duties is a basic, key internal control and one of the most difficult to achieve. It is used to ensure that errors or irregularities are prevented or detected on a timely basis by employees in the normal course of business. | Authorizing a transaction, receiving and maintaining custody of the asset that resulted from the transaction. | Documentation procedures| Provides evidence that transactions and events have occurred.| Use of remittance advice. Mail receipts, cash register tapes and deposit slips. | Physical, mechanical, and electronic controls| Physical control safeguards assets. Mechanical and electronic safeguards and enhances accuracy and reliability of accounting records.| Time clocks are used to record time that employees worked.| Independent internal verification| Is the principle of review, comparison, and reconciliation of data that is prepared by employees.| Cash receipts get counted daily by supervisors and a treasurer compares all receipts to daily bank deposits.| Other controls| Two more controls include Bonding of employees who handle cash and rotating employee’s duties and requiring employees to take vacations.| One example of bonding is obtaining insurance for misappropriation of assets by employees that are dishonest. An example of rotating is to deter employees from attempting thefts.|
Principles of Cash Management| How it Works|...