Substantive Procedures For Cash Outflow Irregularities

985 words - 4 pages

Substantive Procedures for Cash Outflow Irregularities


Substantive Procedures for Cash Outflow Irregularities
Apollo Shoes has recognized that there is a risk of loss due to irregularities in cash outflows, accounts payable, and payroll. Substantive procedures for cash outflows, accounts payable, and payroll are needed to detect irregularities in each of these. Failure to implement appropriate procedures will lead to loss irregularities.
Substantive Procedures to Evaluate Cash Irregularities
Substantive procedures for detecting irregularities in the cash cycle follow normal audit procedures of testing internal controls over cash and by collecting and evaluating audit evidence ...view middle of the document...

 Compare deposit slips to cash journal.
 Observe process of reconciling deposit to bank account.
 Send account verification to Twenty First National Bank to confirm cash balances.
4. Checks (Wells, 2011).
 Confirm checks are pre-numbered.
 Confirm checks are stored in a secure location.
 Identify out of sequence cleared checks.
 Evaluate any voided checks.
 Sample names on checks.
 Sample check endorsements.
 Vouch checks to source documents.
 Confirm checks tie to voucher packages.
 Confirm that the signature on checks is made by an authorized person.

5. Electronic Payments
 Evaluate procedures for payroll direct deposit
 Observe procedures for electronic payments.
 Vouch payments to source documents.
 Confirm vendor balances.
 Sample vendor names and account numbers.
 Confirm daily cash disbursement reconciliation to bank accounts.
6. Bank Reconciliation
 Observe reconciliation process.
 Confirm that bank reconciliation is made by a person other than those making deposits and receiving cash.
 Confirm that bank reconciliations are reviewed and approved by Joe Bootwell, CFO.
Substantive Procedures to Evaluate Accounts Payable
Fraud and abuse is a process that needs to be curtailed. Internal controls need to be put in place to address weaknesses on an ongoing basis. For Unrecorded Liabilities there were several checks that were outstanding in the Apollo Shoe Case. For preventing and detecting fraud here are some suggestions:
 Separation of duties
 No individual involved in the payment process should process or reconcile the bank statement, or even have access to it.
 Separate accounts can be used for paper and electronic transactions
 Monitoring and reconciliation should be performed daily
 Proper management and protection of user access and account information
 Username and passwords should be guarded and not shared
 Passwords should be changed frequently
 Keep passwords updated for users who no longer work for the company
 Never leave computer unattended, even for a short time, log off
Substantive Procedures to Evaluate Payroll Irregularities
Apollo Shoes outsources payroll to Roll Pay Payroll Services for processing. Extra observance by the internal auditor is given to payroll to maintain integrity in the transfer of funds to the general account to cover payroll expense. Payroll is authorized and collected through a time clock and authorized by supervisors....

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