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Acounting

Essay by   •  March 12, 2019  •  Essay  •  755 Words (4 Pages)  •  28 Views

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In order to assist Sarah in minimising the risk of losing cash in her business, we first need to define the problem that exists before we can address the issue. In this case, it seems that the main concern that Sarah has is the apparent decrease in the amount of money banked everyday, even though sales have been steady. The amount of money banked should be correspondent to the level of sales and as this is not the case, it is considered not normal and therefore a reliable solution must be developed in order to solve this issue. The following report will contain a variety of these solutions that can potentially fix the problem, as well as different controls which should be implemented to reduce the level of unethical practices such as theft and fraud from occurring.

Since cash is the asset most susceptible to theft, an efficient internal control system for handling and recording cash transactions is vital. In saying this, one solution that Sarah may use to tackle her current issue is to enable internal control over the company's cash receipts and payments. More specifically, demonstrating good use of independent internal verification by having either her or a supervisor count the cash receipts daily and comparing the total receipts with the amount banked. In doing so, Sarah will add transparency to the business by making it easier to see what actions are being performed as well as broaden her understanding about what goes on during trading hours. Furthermore, displaying good use of independent internal verification will help Sarah identify the reason behind why she has been losing money and potentially determine whether the university student employee has any affiliation with the decrease in the amount banked. Another way that can ensure the safety of funds is to limit or minimise the amount of cash on hand. This could include physical, mechanical and electronic controls such as the use of more electronic payments to reduce the risk of theft. With this also comes the establishment of responsibility which ensures that only designated personnel are authorised to handle cash receipts. Having an establishment of responsibility is an essential characteristic of internal control and by having a clear understanding of who is responsible for what task will help identify problems quicker and avoid confusion in the future.

Aside from these controls, Sarah can also choose to apply documentation procedures and segregation of duties to her company to aid in the protection of her funds. This heavily relates to the concern of staff members simply putting the money into the till. As segregation of duties is less divided among staff members, the chance of fraud or theft increases so it is essential that the principle of segregating duties is established in order to avoid this. The fact that staff sometimes do not even record anything means that noone has any physical proof of the details of a particular transaction and this again,

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