Auto Parts Inc. manufactures and sells auto parts to car dealerships as well as the general public. Cash receipts come in the form of credit card, electronic payments, cash and check. Very little cash or check is received through the mail however there may be one or two orders through the mail. The company receives cash at their store location from customers and electronic payments from the dealerships on a daily basis. The sales department is responsible for sales to the dealerships. Cash is not received at the manufacturing plant. However there is a petty cash fund at the plant for incidentals. Cash disbursements are made to purchase supplies and inventory and for daily operations of the plant and store. In order to prevent errors and fraud, the following controls have been proposed for the cash receipt and disbursement process. Cash Receipts
7 When cash/checks are received in the mail, two people should open the mail. 8 All checks should be endorsed immediately.
9 A list of the cash receipts should be prepared immediately. 10 All cash/checks will go to the cashier’s office where the deposit slip is prepared. 11 Deposits are made daily by 2pm. Any cash receipts that come in after that time is kept in a locked safe until the next day. The supervisor and the lead cashier are the only persons with the key. 12 The list of the cash receipts and remittances will be sent to accounting to be recorded. 13 For receipts at the cash register, the drawer will be counted at the beginning of the cashier’s shift and again at the end. There will be $100 kept on hand in the drawer for change. 14 The lead cashier or supervisor must be present when the drawer is counted. The cashier will complete the form detailing how much cash, credit card and checks are received. This should be compared to the register tape. Both the cashier and supervisor must sign off on the form. 15 At the end of the day, once the drawer is counted, all cash is locked into the safe until the next day when the deposit will be prepared and sent to the bank. 16 Once the deposit is made, a copy of the slip from the bank should be compared to the cash receipt and remittance list and the general ledger by accounting to ensure all of the receipts were deposited. 17 Bank reconciliations shall be prepared monthly by an employee who does not perform any of the other above functions and reviewed and approved by the supervisor. This should be prepared no later than five days after the bank statement is received for the month. 18 All electronic payments received from dealership orders must be compared to the customer accounts each month once the bank statement is received. 19 All persons handling cash should be bonded.
20 Cash disbursements must be authorized by the supervisor in accounts payable. 21 There must be an approved purchase order, invoice and receiving report before payment can be authorized. 22 Payments over $10,000 must have two signatures from persons in the cash disbursement office that are authorized by the board of directors. 23 Pre-numbered blank checks will be locked up in a file cabinet in which only the authorized signers have access to it. 24 The accountant will record journal entries for all cash disbursements. 25 Invoices shall be marked paid to prevent double payment.
26 Bank reconciliations will be performed no later than five days after the bank statement is received for the month and reviewed and approved by the supervisor. 27 For the petty cash fund, any disbursements from this fund must be approved by...