2 cash receipt is defined as a written document that

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2Cash receipt is defined as a written document that is normally produced by the company every time it receives money for good or services. When a purchase transaction is created, a cash receipt is processed to accompany the purchase and a receipt becomes a record that allocates the sale of the product upon cash payment. Primary control of cash receipts includes separating cash handling responsibilities among different individuals, therefore establishing a segregation of duties. When you successfully establish separation of duties and responsibilities, a single individual does not have control over the entire cash process. The existence of cash accountability ensures that cash has been properly been accounted for. Segregation of duties help mitigate and/or avoid lost or stolen cash receipts, irregularities going unchecked, inaccuracy of cash application and ultimately holding people and process accountable. Ethics and Professionalism: AttitudesJohn approves all requests for payment out of the $200 fund, which is replenished at the end of each month. At the end of each month, Johnsubmits a list of all accounts and amounts to be charged and a check is written to him for the total amount. John is the only person ever to tallythe fund. Explain the internal control weakness and describe how internal controls can be improved upon. What questions would you ask tofind out additional information regarding this internal control situation? 3Some of the weaknesses associated with internal controls include; insufficient records/documentation as well as not having a clear defined business practice. Another point of contention would be lack of due processes, dual control, conflict of interest and segregation of duties. In order to improve the internal control mechanism, there is an immediate need to set apart or segregate duties, secondly, limit access to create dual control and transparency, and lastly you could add a third individual to review the financial statements--This way you create checks and balances. Finally, allow employees to take vacations and keep in mind the same key components when cross training back up help for the team.
Ethics and Professionalism: AttitudesAll of the company’s cash disbursements are made by check. Each check must be supported by an approved voucher, which is in turnsupported by the appropriate invoice and, for purchases, a receiving document. After reviewing the supporting documentation, you approve thevoucher. John prepares the checks for the CFO's signature. John also maintains the company’s check register (the cash disbursementsjournal) and reconciles the bank account at the end of each month. 4Authorization is the internal control in question for this matter because John is one who has the sole responsibility of handling checks as well as the company check register. This is a conflict of interest and a big red flag. Regarding the current control system, the person who is responsible for inbound of cash cannot have access to outbound cash and a different individual should be responsible for handling the reconciliation at month end in addition to having a manager or controller review and sign off the bank reconciliation. The key here is avoiding conflict of interest, establishing segregating duties as well as transparency, and assigning dual controls to ensure proper due process, mitigation of risk due to fraud and proper handle of financial transactions.

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