Procedures and Requirements

1. Duties between the cash payments and cash receipts functions are segregated.

2. Signature plates are kept under lock and key.

3. The accounting department matches invoices to receiving reports or special authorizations prior to payment.

4. All checks are mailed by someone other than the person making out the check.

5. The accounting department matches invoices to copies of purchase orders.

6. The blank stock of checks is kept under lock and key.

7. Imprest accounts are used for payroll.

8. Bank reconciliations are to be accomplished by someone other than the one who writes checks and handles cash.

9. A check protector is used.

10. Surprise counts of cash funds are conducted periodically

11. Orders can be placed with approved vendors only.

12. All purchases must be made by the purchasing department.

Reasons for Controls

a. Prevents people from processing phony payables and diverting the signed checks to themselves.

b. Prevents payroll checks for excessive amounts from being cashed.

c. Ensures that people writing checks cannot cover a temporary “borrowing” of cash.

d. Prevents the abstraction of cash receipts from being concealed by the recording of fictitious payments.

e. Helps guard against checks being forged.

f. Prevents the fraudulent use of properly signed checks.

g. Helps prevent temporary “borrowing” from established cash funds.

h. Helps prevent unauthorized changes to very important documents

i. Prevents payment for goods and services not actually received.

j. Prevents payments for purchases that have not been properly authorized.

k. Assures that purchases are “arm’s- length” transactions.

l. Prevents inappropriate purchases by un-authorized people.

Listed are 12 internal control procedures and requirements for the expenditure cycle (purchasing, payroll, accounts payable, and cash disbursements) for a manufacturing enterprise. Next to the list of controls is a list of reasons for the various controls. Required List the numbers 1 through 12 and then match each procedure or requirement with the most appropriate reason for implementing the control. Each reason can be used onlyonce.